Shoppers tempered their spending in April as higher gas prices linked to the Iran war left less money for some nonessential purchases, according to Commerce Department data released Thursday. Overall retail sales rose 0.5% for the month, a slowdown from a revised 1.6% increase in March, which had been the biggest one-month jump in more than three years. Excluding sales at gas stations, retail sales rose 0.3% in April, down from the 0.7% pace in March.
The mix of spending was uneven across categories. The Commerce Department data showed sales at department stores fell 3.2% in April, while sales at furniture and home furnishings stores slipped 2%. By contrast, online retailers and electronics and appliance stores posted solid sales gains. Building material and garden equipment businesses saw a modest 0.1% increase.
The report offered only a partial view of consumer spending because it did not include areas such as travel and hotel stays, and it noted that the lone services category—restaurants—rose 0.6%. Economists focused on the so-called control group, which excludes food services, autos, building materials and gas station sales and is used to calculate economic growth. The control group rose 0.5%, which economists described as a good sign of solid spending by consumers.
The broader backdrop for the retail numbers was energy costs rising after the Iran war that began in late February led to the shutdown of the Strait of Hormuz, cutting off one-fifth of the world’s daily oil supply. The average price for a gallon of regular gasoline rose again overnight to $4.53 on Thursday, according to motor club AAA—$1.35 more than a year earlier.
Economists said the timing of tax refunds helped cushion April’s slowdown, but they warned the effect may not last. Oliver Allen, a senior economist at Pantheon Macroeconomics, estimated that individual income tax refunds in April were $22 billion higher than in the same month in 2025—equivalent to around 3% of monthly retail sales and slightly larger than the impact of higher gas prices over the same period. Allen wrote that some of the refund money would be saved, but “much of it has been spent,” and he said the “flow of refunds will taper dramatically in May, leaving consumers far more exposed to the surge in fuel costs.”
Michael Pearce, chief U.S. economist at Oxford Economics, estimated that higher tax refunds have offset the impact of gas prices by a ratio of around 2 to 1. He said that, with refund season behind consumers and gas prices still creeping higher, the offset is expected to reverse in the months ahead, putting downward pressure on spending growth.
Despite the spending pressure suggested by retail data, the labor market and unemployment claims so far have been more resilient. The Labor Department reported last month added 115,000 jobs, and weekly applications for unemployment benefits were 211,000—within a historically low range. At the same time, other inflation readings showed mounting concern: the Labor Department reported Wednesday that the U.S. producer price index rose 1.4% in April, the biggest monthly increase in more than four years, and a day earlier the consumer price index jumped 3.8% year over year in April 2025, the biggest year-over-year increase in more than three years.
The pressure from energy costs already has shown up in a range of expenses, economists said, including plane tickets and baggage fees as well as household items such as soap and toothpaste. A clearer view of how inflation is affecting consumers may come next week, when major retailers including Walmart and Target begin releasing quarterly financial results. Some companies are already seeing warning signs. Coulter Lewis, co-founder of Sunday Lawn and Garden, said sales from January through the end of April were up 70% compared with a year earlier, but he noted that customers are experiencing financial strain from higher prices, and that shoppers are leaning away from subscriptions that cost $300 a year. “They’re spending more money on fewer things,” Lewis said. “That trade-down from pro service is like, ‘okay, well we’ve got to make room for these other increases in our life, and so I’m going to try to do this myself.’”