American consumers tightened their wallets in February as escalating tariff concerns, harsh winter weather, and deteriorating confidence combined to dampen retail spending. According to the CNBC/NRF Retail Monitor, core retail sales declined 0.22% month-over-month, marking the second consecutive monthly decline after January's 1.27% drop.

The pullback comes as the University of Michigan's Index of Consumer Sentiment fell to 64.7 in February from 71.7 in January—the second straight monthly decline and a level that historically signals cautious consumer behavior. For retailers hoping that a strong holiday season would carry momentum into early 2026, the data provides a sobering reality check.

The Tariff Factor

The February downturn coincided with President Trump's announcement of sweeping tariff measures at the beginning of the month. Initial announcements included 10% tariffs on goods from China and 25% tariffs on goods from Canada and Mexico, with the China tariffs later doubled to 20%.

"Consumer spending dipped slightly again in February due to the combination of harsh winter weather and declining consumer confidence driven by tariffs, concerns about rising unemployment and policy uncertainty," said NRF President and CEO Matthew Shay.

The tariff announcements created immediate uncertainty for consumers contemplating major purchases:

  • Price expectations: Consumers anticipating higher prices may have deferred purchases while waiting to see if tariffs would be implemented, modified, or reversed
  • Economic anxiety: Tariff rhetoric raised concerns about broader economic stability and potential job losses in affected industries
  • Import-dependent categories: Electronics, appliances, and other import-heavy categories faced particular uncertainty

"The consumer is sending a clear message: uncertainty about trade policy translates directly into caution at the cash register. Until there's clarity on the tariff situation, spending is likely to remain subdued."

— Retail industry economist

Weather Impact

February's harsh winter weather compounded the tariff effect. Major storms across the Midwest and Northeast kept shoppers home and disrupted retail operations. While e-commerce provided an alternative channel, the weather particularly affected categories that depend on in-store shopping experiences.

Weather-sensitive categories including apparel, home improvement, and seasonal goods bore the brunt of storm-related disruptions. Grocery stores, by contrast, often see sales spikes before major storms as consumers stock up on essentials.

Year-Over-Year Perspective

The monthly decline masks continued growth when measured against year-ago levels. Core retail sales remained up 4.11% year-over-year, a healthy growth rate that reflects the accumulated impact of wage gains and overall economic resilience.

However, the year-over-year comparison has become less favorable as difficult 2024 comparisons drop out of the calculation. Retailers who grew accustomed to double-digit annual growth during the pandemic recovery period must now manage expectations around more normalized growth rates.

Consumer Sentiment Deep Dive

The University of Michigan sentiment decline reflects several worrying trends:

  • Inflation expectations: Consumers continue expecting elevated price increases, dampening purchasing power perceptions
  • Job security concerns: Rising unemployment anxiety has emerged as a new worry after years of historically tight labor markets
  • Political uncertainty: Trade policy volatility has introduced a new variable that consumers struggle to predict or plan around
  • Wealth effects: Stock market volatility in early 2026 may have dampened the wealth effect that supported spending in 2025

Notably, sentiment declined across income groups—not just lower-income households that might be most sensitive to price increases. The breadth of the decline suggests anxiety extends throughout the consumer base.

Category Performance

Retail spending varied significantly by category:

Discretionary weakness: Categories like furniture, electronics, and apparel showed particular softness as consumers prioritized essentials over big-ticket purchases. These categories are most sensitive to confidence swings and easiest to defer.

Grocery resilience: Food and beverage sales remained relatively stable, as consumers must eat regardless of economic sentiment. However, trading down to private labels and discount grocers continued.

Restaurant pressure: Dining out, often the first category consumers cut when tightening belts, showed continued weakness. Fast-casual and casual dining chains have noted traffic declines in recent quarters.

E-commerce steadiness: Online retail maintained share gains, benefiting from weather disruptions and continued consumer preference for convenience. However, even online spending decelerated from 2025's pace.

Retailer Responses

Major retailers are adapting strategies to navigate the uncertain environment:

  • Promotional intensity: Retailers have increased promotional activity to drive traffic, reversing the promotional restraint that characterized the supply-constrained pandemic era
  • Private label push: Store brands are gaining emphasis as retailers seek to offer value-conscious alternatives
  • Inventory management: Tighter inventory controls aim to avoid the markdowns that plagued retailers in late 2022
  • Price messaging: Marketing emphasizes value and savings rather than aspiration and newness

Outlook for Coming Months

Retail analysts expect near-term conditions to remain challenging:

Tariff uncertainty persists: Until trade policy stabilizes, consumer confidence is likely to remain suppressed. Even if tariffs are modified or reversed, the uncertainty itself damages spending propensity.

Tax refund boost: IRS refunds historically provide a first-quarter spending lift that could partially offset February weakness. However, processing delays from the government shutdown may push refund-driven spending later than usual.

Spring improvement possible: Weather normalization and seasonal patterns typically lift retail activity in March and April. Easter timing (early April this year) could provide additional support.

What It Means for the Economy

Consumer spending accounts for roughly 70% of U.S. GDP, making retail trends a critical economic indicator. The February weakness, if sustained, would represent a headwind to first-quarter growth that could prompt economists to revise forecasts lower.

However, context matters: the monthly decline followed a strong holiday season, and year-over-year growth remains positive. The consumer is not collapsing but rather exercising the kind of caution that naturally accompanies economic uncertainty.

For investors, the retail weakness reinforces the rotation toward defensive sectors—consumer staples, utilities, and healthcare—that has characterized early 2026 trading. Discretionary retailers face a more challenging environment that demands careful stock selection rather than sector-wide bets.