Retail Sales Show Dining Out Declines and eCommerce Gains Ground as Consumers Pull Back

There’s increasing evidence that consumers are triaging their spending — picking and choosing where they will (or even can) allocate their money as tariffs and macro uncertainty cloud near-term economic horizons. 

The latest data on retail sales show that in February, per the initial reading from the Census Bureau indicate that retail sales were up a muted 0.2% as measured from January — but the latter’s decline was steeper than had been estimated, at 1.2%, where early computations had it at 0.9%. The February data was lower than consensus estimates calling for a 0.6% increase. 

The report on Monday (March 17) would have been worse had it not been for online spending, as non-store retailers (a category that includes eCommerce activity) showed sales gains of 2.4%.

Non-store retail was among the best-performing categories, growing 6.5% compared to February 2024. The rebound in the latest month reverses a 2.4% decline in January. This monthly increase is the largest in 14 months, with the last comparable growth of 2.5% recorded in December 2023.  The read-across here is that consumers are finding deals online, and are comparison shopping to get what they need, certainly when it comes to spending on everyday, essential items.

That shift is evident in the fact that February proved challenging for several retail categories, measured month on month. Electronics and appliance stores (-0.3%), clothing and accessories stores (-0.6%), and sporting goods, hobby, musical instruments, and book stores (-0.6%) all reported declines in sales.

Meanwhile, food services and drinking places experienced their third consecutive month without growth, with February sales down 1.5%, following a 0.7% decline in December 2024 and flat results in January 2025.

As for the essential spending, grocery store sales rose 0.4% in February and were up 3.9% year over year, suggesting a shift in consumer budgets away from dining out and toward eating at home.

The tempered spending has lasted well into the current month, as PYMNTS reported last week that management comments and guidance cuts to quarterly top lines have been a hallmark of retailers and airlines. Elsewhere, and as recently as Friday, in another preliminary report, consumer sentiment slipped by double digits month over month in March and is roughly 27% lower than had been seen a year ago. That decline in sentiment — which drives spending — came from the University of Michigan.

Year-ahead expectations for inflation leaped from 4.3% last month to 4.9% this month, which was the highest reading since November 2022. When consumers expect inflation to worsen over the near term, there’s a confluence of actions as they gauge what’s really essential spending and what’s not, and they reexamine what cash and credit they have on hand, and whether those financial channels will be enough to keep things going at the register.

Separate data released Monday suggest that the credit spigot is tightening. 

In the Survey of Consumer Expectations (SCE) Credit Access Survey, released by the Federal Reserve Bank of New York, rejection rates have risen across all major credit products, with the perceived probability of a rejection for auto loans reaching 33.5% in February. That’s the highest level since the series began. Meanwhile, the share of consumers expecting credit access to become more difficult over the next year surged to 46.7%, up from 42.3% in October 2024.

Over the past year, the share of consumers who applied for and were granted credit has continued to decline, with disparities widening by credit score. In February, only 22.7% of consumers with a credit score below 680 were approved for a credit product, compared to 38% of those with a credit score between 680 and 760. While mid-score borrowers have greater ease of access to credit, even this group has seen a slight dip in approvals compared to previous surveys.

Younger consumers (under 40) remain the most likely to apply for credit, with an application rate of 30.2% in February, above the 27.5% rate for those aged 40-60 and the 19.8% rate for those over 60. However, they also face higher rejection rates, particularly for credit cards and auto loans. Among applicants under 40, 15.4% were denied credit in February 2025, compared to just 7.8% for those over 60.

Discouraged borrowing — defined as consumers choosing not to apply for credit due to fears of rejection — has reached its highest level since the survey’s inception in 2013. In February, 8.5% of consumers reported being too discouraged to apply, up from 6.6% in October 2024.

Consumers are growing more pessimistic about their future borrowing prospects. Now, 46.7% of respondents expect credit to become harder to obtain in the next year, up from 42.3% just a few months ago. 

The Fed’s data comes as PYMNTS Intelligence has reported that credit has been a key, preferred method of payments for a wide financial range of consumers. For consumers living paycheck to paycheck and struggling to pay bills, credit is used for 41% of essential expenses and 43% of nonessential expenses. In comparison, consumers not living paycheck to paycheck rely on credit for 56% of essential purchases and 63% of nonessentials.

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