U.S. retail sales fell less than expected in February, but a sharp downward revision to January's sales could reignite concerns about the economy's growth prospects.
Tuesday's weak report from the Commerce Department bucked the trend of recent labor market data that had suggested the economy remained on solid ground despite some concerns that a recession was looming.
Retail sales dipped 0.1 percent last month as automobile purchases fell and cheaper gasoline undercut receipts at service stations. January's retail sales were revised down to show a 0.4 percent decline instead of the previously reported 0.2 percent increase.
"Consumers remain cautious and hesitant to spend despite an improving jobs picture and evidence of accelerating wage increases," said Alan MacEachin, an economist at Navy Federal Credit Union in Vienna, Virginia.
Retail sales excluding automobiles, gasoline, building materials and food services were unchanged after a downwardly revised 0.2 percent increase in January. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have risen 0.6 percent in January.
Economists polled by Reuters had forecast retail sales slipping 0.2 percent and core retail sales rising 0.2 percent in February.
Last month's weak core retail sales reading, together with January's modest gain, suggest that consumer spending will probably remain tepid in the first quarter after growing at a 2.0 percent annualized rate in the fourth quarter.
Prices for U.S. government debt rose after the data, while the dollar fell against the euro and yen. U.S. stock index futures were trading lower.
The report came as Federal Reserve officials prepared to gather for a two-day policy meeting. The U.S. central bank is expected to leave interest rates unchanged as policymakers monitor developments on global financial markets, domestic inflation and the labor market. The Fed hiked its benchmark overnight interest rate in December for the first time in nearly a decade.
In a separate report, the Labor Department said its producer price index dropped 0.2 percent last month on lower energy and food costs, after edging up 0.1 percent in January. In the 12 months through February, the PPI was unchanged after falling 0.2 percent in the year through January. It was the first time since January 2015 that the year-on-year PPI did not decline.
With the dollar losing some momentum after gaining 20 percent against the currencies of the United States' main trading partners between June 2014 and December 2015, imported deflation is starting to wane. That could curb further declines in producer prices.
But oil prices, which tumbled by as much as 4 percent on Monday on concerns that a six-week market recovery has gone beyond the fundamentals, remain a wild card. So far this year, the dollar has gained about 0.9 percent on a trade-weighted basis.
A 4.4 percent drop in the value of sales at service stations weighed on retail sales last month. Gasoline prices dropped 9 percent in February, according to the U.S. Energy Information Administration, as oil prices fell further.
Retail sales were also hurt by a 0.2 percent fall in sales at auto dealerships and a 0.5 percent drop in receipts at furniture stores. Auto sales declined 0.2 percent in January.
Receipts at electronics and appliance stores slipped 0.1 percent. But there were pockets of strength, with clothing store sales rising 0.9 percent last month and receipts at building materials and garden equipment stores gaining 1.6 percent.
Sales at sporting goods and hobby stores rose 1.2 percent and sales at restaurants and bars increased 1.0 percent. Online store sales dropped 0.2 percent.