In February, U.S. retail sales showed signs of improvement, indicating continued economic growth in the first quarter. The increase of 0.2% last month came after a previous decline of 1.2% in January. While economists had anticipated a 0.6% rise, the actual figure fell short. Various factors, such as tariffs on imports and layoffs of government workers, have impacted consumer sentiment, potentially hindering sustained growth.

Trade tensions resulting from President Trump's tariffs have raised concerns about inflation and potential job losses, which could dampen consumer spending. Similarly, the mass layoffs of public workers aimed at reducing the federal government's size are expected to negatively affect spending trends. Bank of America's data from February indicated a slowdown in discretionary spending, particularly in the Washington D.C. area, while fluctuations in the stock market and rising food prices may further impact consumer behavior.

Retail sales, excluding certain categories, increased by 1.0% in February, compared to the previous month's decline of 1.0%. Core retail sales, which closely mirror consumer spending, were expected to rebound by 0.3% after a prior 0.8% downturn in January. However, these positive shifts may not be sufficient to offset the anticipated slowdown in consumer spending compared to the robust growth seen last quarter.

Despite the Atlanta Federal Reserve's prediction of a 2.4% decline in GDP, most economists foresee a more modest growth rate of around 1.2% for this quarter. The economy expanded at a 2.3% pace in the fourth quarter of the previous year, but various challenges, including tariffs and government layoffs, are poised to influence economic performance moving forward.