Retail Sales Rise Amid Concerns Over Iran War Impact

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Retail sales in the United States rose 0.6% in February, a better-than-expected increase after a slight decline in January. However, concerns are growing that the ongoing war in Iran, which has sent gas prices soaring, could threaten to undermine consumer spending in the coming months.

Why it matters

Consumer spending is a critical driver of the U.S. economy, accounting for around 70% of economic activity. The rise in retail sales in February suggests that Americans were willing to open their wallets, but the sharp increase in gas prices due to the Iran conflict could dampen that momentum and put a strain on household budgets.

The details

Shoppers increased their spending in February, particularly on big-ticket items like cars and clothing, after pulling back at the start of the year due to severe winter storms. However, the retail sales data did not reflect the impact of the Iran war, which has sent gas prices soaring. The national average for a gallon of regular gasoline hit $4.06 on Wednesday, a dollar more per gallon than before the conflict began.

• Retail sales rose 0.6% in February, up from a revised 0.1% decline in January.
• Gas prices sped past an average of $4 a gallon on Tuesday for the first time since 2022 and jumped another 4 cents overnight.

What’s next

Economists will be closely monitoring the impact of the Iran war on consumer confidence and spending in the coming months, as the sharp rise in gas prices could put a strain on household budgets and derail the recent momentum in retail sales.