Retail Sales Slowed Last Month as Inflation Takes Toll

Stock buybacks may rise this year, Goldman says

Retail sales growth slowed dramatically last month, as inflation hitting a record crimped consumer buying.

February retail sales rose 0.3% last month to $658.1 billion, compared with January's 4.9% increase, the U.S. Census Bureau said today.

Retail sales slowed as inflation took a bite from consumers' wallets, rising 7.9% in February, a 40-year high. As gasoline prices surged, consumers boosted fuel spending by 5.3%, while throttling back on other spending, which rose 0.2%.

An annual report from the National Retail Federation also forecasts slowing sales for this year, thanks in part to inflation. The NRF forecasts annual growth of 6% to 8%, reaching nearly $5 trillion, excluding restaurants, gas stations, and car dealers. This is down from a 14% growth rate in 2021, which was the biggest jump in more than 20 years.  

The group said it expects non-store and online sales will climb about 13% to $1.2 trillion. The NRF also anticipates strong job and wage growth and forecasts U.S. GDP coming in at 3.5% for the year, dragged down by the surge of inflation and tightening of monetary policy, and less fiscal stimulus from Washington.

The NRF said it also expects consumers to shift to spending more on services and experiences, and less on goods. The NRF projects more consumer spending for restaurants and trips while they cope with sticker shock at the grocery store and gas stations.

The Big Number: $1 Trillion

This could be a record year for stock buybacks, according to Goldman Sachs Group Inc (GS).

S&P 500 companies have announced $248 billion worth of stock buybacks through the end of February, a record for the first two months of the year. All told, Goldman Sachs expects U.S. companies to buy back a record $1 trillion this year, up 12% from $99 billion last year. 

Among the companies recently announcing buybacks is Amazon.com Inc. (AMZN), which hadn’t bought back stock since 2012, and announced it would buy back $10 billion. Others include Union Pacific Corp. (UNP), which led the way with a $25 billion buyback plan valued at roughly $25 billion. Pepsico Inc. (PEP) and industrial gas company Linde Plc (LIN) said they plan to repurchase as much as $10 billion. Colgate-Palmolive Co. (CL) and Best Buy Inc. (BBY) have also joined the buyback club.  

Companies appear to be taking advantage of the volatility that has rattled markets lately. Stock buybacks can support stocks by reducing the company’s outstanding shares and boosting its per-share profit. They can also boost investor sentiment by suggesting executives are optimistic about their companies’ outlook and confident in their financial position.

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