Retail sales recovered in February after seeing the steepest decline in almost a year the month before.

Retail sales rose 0.6% in February from the previous month, according to Census Bureau data. Economists had expected a 0.8% increase in spending, according to Bloomberg data. Retail sales in January previously showed a surprising decline of 1.1%.

“February’s modest recovery in retail sales suggests consumer spending growth has slowed in early 2024,” said Michael Pearce Oxford Economics, deputy chief U.S. economist.

February sales, excluding cars and gasoline, rose 0.3%, in line with expectations.

Building materials and garden tools led the gains by category, up 2.2%. Sales rose 1.6% at auto and parts dealers, while electronics and appliance stores rose 1.5%. The largest decline occurred in furniture and home furnishing stores, where turnover fell by 1.1%.

The drag on consumers comes as the economy has largely remained on solid footing to start 2024. Consensus projections for first-quarter economic growth have moved higher, while the labor market has continued to add more jobs than previously expected.

This strength in the economy has come about as recent inflation figures have shown that price increases are not slowing down as quickly as initially hoped. The combination of more persistent-than-expected inflation and an economy that is still growing has economists believing the Federal Reserve can wait longer to cut rates without tipping the economy into recession.

“This month’s retail sales report supports our view that the economy is strong but cooling,” Ellen Zentner, Morgan Stanley’s chief economist, wrote in a note to clients. “There is no reason for the Fed to rush the next rate move. We expect the Fed to first cut rates in June, once the Fed has sufficient data to be confident that inflation is moving sustainably toward 2% target moves.”

MIAMI, FLORIDA – MARCH 12: People shop at a Kohl’s department store on March 12, 2024 in Miami, Florida. (Photo by Joe Raedle/Getty Images) (Joe Raedle via Getty Images)

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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