US retail sales numbers for February reflect a period when the Iran conflict wasn’t an issue and when gas prices were still moderating.

Against this relatively benign backdrop, February was a solid month for retail – even if consumers remained a little cautious about prices and the direction of the economy. This generally positive attitude helped push overall retail sales up by 3.6 per cent and core retail sales by 3.8 per cent. These numbers include inflation, and when this is removed, volumes are +0.8 per cent for overall retail and +1 per cent for core retail. Both sets of numbers – volume and value – are respectable, even if the core number has moderated since the start of the year.

While it is still early in the season, some tax refunds started to materialize towards the end of the month and our data show that the average refund was running 9.6 per cent higher than the prior year.

This, for those who received them (and those who were anticipating receiving refunds), helped provide a modest boost to spending as households felt they had a little more cash to splash during the month. Not all of the windfall went to retail, but where it did, it was split between some bigger ticket items (mostly electronics like phones and laptops) and smaller indulgences like apparel.

From our initial data, the consumer seems a bit more reticent to go on a carefree spending spree with their tax refunds this year, and a higher proportion of people are putting some of the money to paying down debts or channeling it into savings.

While the overall numbers are good and suggest a continued trajectory of reasonable expansion for retail, they do not reflect the problems that have arisen since the start of the Iran conflict. Since the start of March, GlobalData’s numbers show that consumer sentiment has soured and that rising gas prices are starting to spook consumers. As such, it is likely that the deterioration will weigh on growth in the coming months – although it may be partly offset by higher inflation. We have also seen some early evidence that consumers are being more frugal with their tax refunds, with more households now looking to save a larger proportion as opposed to spending it.

On a category level, clothing stores had a very strong month with sales up by 7 per cent. Some of this is related to the early refunds, but some is also a bounce back as the weather improved during the month and consumers were able to resume buying after a disrupted January. Discounts were also quite generous in February, which helped to stimulate consumer interest. Apparel volumes rose by 4.2 per cent in the month.

Food and beverage stores posted a 0.4 per cent sales decline over the prior year in value terms. Underlying volumes slipped by 2.1 per cent. Some of this is due to a sharper transfer from traditional supermarkets to alternative channels such as mass merchants or club formats as consumers continue to look for ways to save money. Valentine’s spending – to which grocery is heavily exposed – was also more modest than expected, with some higher discounts depleting growth.

Furnishing and home stores reported a 5.6 per cent decline in sales. In our view, the Census reporting here exaggerates the challenges in the home market as very few specialist players are posting anywhere near this level of decline. Within home, we are also seeing a transfer of spending from specialists – which tend to focus on bigger ticket furniture items – to generalists (like off-price, mass merchants, club and value) which are more focused on softer decorative accents. Nevertheless, big ticket spending on home requires confidence and sometimes financing – neither of which are in the best of places at present.

Electronics stores saw 4.9 per cent growth over the prior year. Within this a number of personal electronics categories like phones and computing are being helped along by the tax refunds. Notably, TVs – which are usually a big focus for tax refund spending – received less of a boost this year. The replacement cycle for PCs and laptops also strengthened over the first part of this year.

Overall, retail has started the year on the front foot. However, the sector now starts to lap some tougher prior-year numbers, and it does so at a time when some of the underlying fundamentals are starting to weaken.