US retail sales rose moderately in February as more expensive gasoline and food forced households to cut back spending on other goods, which could restrain economic growth this quarter.

Retail sales increased 0.3 percent last month, the Commerce Department said on Wednesday. Data for January was revised higher to show sales surging 4.9 percent instead of 3.8 percent as previously reported. Economists polled by Reuters had forecast retail sales slowing to 0.4 percent, with estimates ranging from as low as a 0.7 percent decline to as high as a 1.7 percent increase.

The moderate rise in retail sales came ahead of an expected interest rate increase from the Federal Reserve later on Wednesday, the first in just over three years.

“Higher prices for food and gas means fewer dollars left to be spent at other retailers,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.

Retail sales are mostly made up of goods and are not adjusted for inflation. Restaurants and bars are the only services category in the retail sales report.

Gasoline prices jumped 24 cents to an average of $3.49 per gallon in February from January, according to data from the US Energy Information Administration. They have since pushed to a record high above $4 per gallon after Russia’s invasion of Ukraine on Feb. 24. It has also boosted wheat prices, which could keep food prices high.

Record gasoline and higher food prices are hitting lower income households the hardest.

The Russia-Ukraine war, which is also expected to further strain supply chains, prompted economists at Goldman Sachs last week to slash their gross domestic product estimate for the first quarter to a 0.5 percent annualised rate from a 1.0 percent pace. The economy grew at a robust 7.0 percent rate in the fourth quarter.

A recession is not anticipated this year as consumers are sitting on at least $2.5 trillion in excess savings. Job openings at the end of January were a near record 11.3 million.

“The US economy is still likely to see continued growth, though at a slower pace than seemed possible at the start of the year,” said Bill Adams, chief economist at Comerica Bank in Toledo, Ohio. “Americans accumulated a huge stock of savings in 2020 and 2021, which they will dip into in 2022 to cushion the blow from higher energy and food prices. Extremely high job openings mean cash-strapped households can make ends meet by picking up additional shifts at work.”

By Lucia Mutikani; Editor: Chizu Nomiyama

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