U.S. retail sales were higher than they’ve been in seven months, auto sales saw a rebound and even the weather was improved in February.
And although experts note that gas prices are escalating because of the war in Iran, the Commerce Department report released Wednesday – it was delayed by the government shutdown – indicated the U.S. economy was fairly stable as the war began.
However, the U.S.-Israel-led conflict in the Middle East has sent raised global oil prices more than 50%, and the national average retail gasoline price this week topped $4 a gallon for the first time in more than three years.
A prolonged war and further increases in gasoline prices could offset some of the anticipated boost to consumer spending and the overall economy from tax cuts, economists warned, according to a report from Reuters. They expected the conflict to weigh on growth in the second quarter.
“I expect consumer spending to be softer in the first half of the year than would have been the case in the absence of the surge in gasoline prices, but I project that energy prices will recede significantly within a few months, allowing real outlays to rebound in the second half of the year,” Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, told Reuters.
The Commerce Department reported that retail sales rose 0.6%, the largest increase since last July, after an upwardly revised 0.1% dip in January. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, rising 0.5% after a previously reported 0.2% drop in January.
The Census Bureau is still catching up on data releases following delays caused by last year’s government shutdown.
Some of the increase in retail sales reflected higher gasoline prices, which had started rising in anticipation of the Middle East war. In addition to expensive gasoline, consumers are also facing higher prices at the supermarket stemming from President Donald Trump’s tariffs.
The broad rise in sales was partly driven by tax refunds, Reuters reported. The average refund was up $350 through March 20 compared to the same period in 2025, Internal Revenue Service data showed.
“Tax refunds are literally saving the economy’s bacon in the first quarter,” Christopher Rupkey, chief economist at FWDBONDS, told Reuters. “Inflated consumer goods are more affordable at least until the income tax refunds run out.”
Receipts at auto dealerships rebounded 1.2% amid promotions and discounts, after dropping 0.7% in January.
Sales at electronics and appliance stores increased 0.5%, while those at building material, garden equipment and supplies retailers rose 0.4%. Receipts at clothing and clothing accessories outlets rebounded 2.0%.
Nonstore sales, which include online retail, increased 0.7%. Sales at service stations rose 0.9%. Sales at sporting goods, hobby, musical instrument and book stores advanced 1.3%.
But furniture store sales dropped 1.0% as did food and beverage store receipts.
