The Great American Spending Shutdown: A Harbinger of an Economic Slowdown?

The job market is chugging along, unemployment remains historically low and wages are rising at a decent clip. Still, consumers aren't spending like they used to.

Why it matters: That's a sharp turnaround from recent years, when shoppers looked unstoppable — even in the face of decades-high interest rates and inflation. Now consumers appear more cautious and spending is weakening, threatening a critical factor that's kept the economy strong.

By the numbers: Retail spending bounced back slightly in February from a sharp pullback at the start of the year. The Commerce Department said Thursday that retail sales rose 0.6% last month. But January's drop was worse than initially thought: Retail sales fell 1.1%, not the 0.8% first estimated.

• It was the fourth straight month with a negative revision to earlier months' data.
• And February's rebound in retail sales was driven by strong sales at gasoline stations that rose nearly 1% — a result of higher gas prices. The data is not adjusted for inflation.
• Retail sales of the control group — which excludes volatile categories like gas, autos, and building materials and therefore tracks more closely with overall consumer spending — was flat in February after a decline in January.

What they're saying: "Elevated interest rates, an uptick in energy costs, and persistent discomfort with price levels continue to push consumers to make trade-offs with budgeting, with goods categories increasingly overlooked in favor of services spending," Kayla Bruun, a senior economist at Morning Consult, wrote in a note.

• "Taken together, the January and February spending data point to softer spending momentum at the start of the year," Gregory Daco, chief economist at EY-Parthenon, wrote — adding that strong income growth may support spending growth through the end of the first quarter.

What to watch: Other indicators hint that the consumer is losing momentum. In a report this week, BofA economists say that spending growth among lower and middle-income households is weakening after "being a point of strength during 2023."

• While the overall job market is healthy, employment for those without a college education has slowed in recent months, the economists say — one factor that might be crimping spending in this cohort.
• Delinquencies on credit card and auto loans have ticked up in recent months as well, according to New York Fed data.

The bottom line: U.S. consumers have powered overall economic growth forward for the last three years, but there are early warning signs that they can't be counted on to do so again in 2024.

This article originally appeared on Axios