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WASHINGTON: Retail sales in the United States contracted in February, driven by declines in sales at department and furniture stores, along with restaurants, according to Commerce Department data released Wednesday.
The cooler economic data comes after a big rebound at the start of the year, as persistent inflation weighs on consumers.
The data is likely to provide the Federal Reserve some respite as it looks to balance its efforts reining in price increases with ongoing troubles in the banking sector — following the dramatic implosion of Silicon Valley Bank (SVB) last week.
Seasonally-adjusted retail sales fell 0.4 percent in February to $698 billion, down from a revised $701 billion a month earlier, said the Commerce Department in a statement.
Data showed consumers cutting back on purchases at auto dealers, department stores, as well as in restaurants and bars.
Purchases at department stores dropped by four percent while those at furniture and home furnishing stores slipped 2.5 percent.
“Retail sales took a step back in February, but not enough to signal a major deterioration in consumers’ willingness to spend,” said Oren Klachkin of Oxford Economics.
The latest numbers follow the release of consumer inflation figures, which showed a day earlier that price increases continued to ease.
However, inflation indicators remain well above the Fed‘s long-term two percent target.
As the Fed mulls a ninth consecutive interest rate hike next week, the impact of its aggressive campaign is being felt in the markets, led by regional banks.
SVB’s collapse last week was driven by its over-exposure to interest rate risks through its holdings of long-duration bonds.
The majority of the bank’s clients were in the high-tech sector, and they moved to withdraw their money after the Fed’s campaign brought the era of cheap lending to an end.
This outflow forced the bank to realize losses on its bonds, prompting a bank run from customers concerned about their deposits.
US finance officials took action over the weekend to ensure SVB’s depositors would be able to recoup their funds, which temporarily halted the sell-off of banking stocks.