Consumers Keep Spending Even as Confidence Wavers

• Discretionary categories showed strength: clothing sales rose 2% month-over-month and 7% year-over-year, while non-store (eCommerce) retailers grew 7.5% annually.
• Confidence is uneven by income: consumers not living paycheck-to-paycheck score in the low 60s on expectations indexes, while those struggling financially remain below neutral in the low 40s.
• Food spending patterns diverged as grocery store sales declined 1% while food services rose 0.4% monthly and over 5% annually, suggesting shifts in allocation rather than contraction.

Market Summary: Consumer Spending Remains Resilient Despite Mixed Confidence

Key Data Points:

U.S. retail and food services sales rose 0.6% month-over-month in February 2026 to $738.4 billion, with a 3.7% year-over-year increase, exceeding expectations. This extends the modest growth pattern characterizing early 2026.

Consumer Behavior Analysis:

Spending continues despite uneven consumer confidence, driven primarily by balance-sheet stability rather than income growth or optimism. The PYMNTS Consumer Expectations Index reveals sharp income-based disparities: higher-income consumers (not living paycheck-to-paycheck) score in the low 60s, while financially stressed consumers score in the low 40s.

Sector Performance:

Strong categories included:

• Clothing: +2% monthly, +7% annually
• Health/personal care: +2.3% monthly
• Motor vehicles: +1.2% monthly
• Non-store/eCommerce: +0.7% monthly, +7.5% annually
• Food services: +0.4% monthly, +5% annually

Weak categories:

• Furniture/home furnishings: declined both monthly and annually (-5.6% YoY)
• Department stores: -5.4% annually despite monthly rebound
• Grocery stores: -1% monthly, -0.2% annually

Market Implications:

February's strength may not persist into March as rising fuel costs impact household budgets. Consumer resilience appears dependent on careful financial management rather than robust income expansion, limiting capacity to absorb additional cost pressures. The grocery-to-dining shift suggests evolving spending priorities amid price sensitivity.

Digital retail channels continue gaining traction, while traditional department stores face structural challenges. Investors should monitor March data for early signs of consumption slowdown as energy costs filter through.