US consumer spending fell in February after a brisk start to the year

Consumers spent less in restaurants, car dealerships and department stores and more on essentials such as groceries and health food stores. Excluding often volatile car sales, total purchases fell 0.1% in February.

A decline in consumer spending, if sustained, would be a concern for the broader economy, as household purchases account for about 70% of total economic output in the US

Retail sales have been volatile lately, falling – on a seasonally adjusted basis – during the holiday season before rising sharply in January and pulling back last month. Retail sales rose 5.4% over the past year, slightly slower than consumer inflation of 6%.

The economy appeared to be off to a strong start to the year. Employers added more than 800,000 jobs in the first two months of the year and unemployment has been low for nearly half a century.

But the effects of higher interest rates as a result of the Federal Reserve’s efforts to fight inflation are visible across the economy.

Sharply higher interest rates exacerbated problematic risk decisions at the $110 billion Signature Bank and $209 billion Silicon Valley Bank, which were taken over by government regulators in recent days. They also slowed orders for machinery, appliances and other manufactured goods and cooled home sales, which have fallen for 12 consecutive months.

Some economists see weaker demand for large purchases as a harbinger of a broader slowdown.

Spending appeared to lose momentum in the second half of February after a very strong first six weeks of the year, according to Bank of America economists.

Credit and debit card data from the bank showed that spending in February slowed from January, with a rise in spending on services such as eating out offset by a fall in spending on goods, including furniture and clothing.

The largest cost-of-living adjustment to Social Security benefits in four decades occurred in January, supporting spending that month. The bank’s economists say the effect was likely to have run its course by February.

Jerry Dawson of Hernando, Fla., says his spending is somewhat limited. The 72-year-old sticks to the essentials, such as new tires for his wife’s car and a new smartphone to replace a broken one.

“I think the economy is probably worse than most people recognize,” he said, pointing to the recent collapse of Silicon Valley Bank and Signature Bank..

Nevertheless, he said he welcomes price reductions for some items that have seen a sharp rise in price since the pandemic, such as supermarket frozen pizzas.

Many retailers have been cautious about the current year in recent earnings reports, with some predicting continued inflationary pressures on shoppers that will leave spending unpredictable.

Throughout the winter, retailers reported mixed results, with shoppers turning to spending on necessities like food. In general, these are retailers that rely on food for a large portion of their sales, such as Walmart Inc.,

went better. Department stores and clothing retailers generally reported weaker numbers due to a continued oversupply of inventories and weaker demand for clothing and accessories.

Earlier this month, Macy’s Inc. that sales could fall by as much as 3% this year and not grow again until 2024 as consumers across all income levels remain under pressure, said the company’s CEO Jeff Gennette.

Walmart, the nation’s largest retailer by revenue, said it expects full-year US comparable sales to grow 2% to 2.5%, excluding fuel sales. That would be slightly lower than the inflation many economists predicted at the beginning of the year.

“Customers are still spending money,” said Walmart CEO Doug McMillon. “Obviously it’s not very clear to us what the second half of the year looks like,” he said last month.

Write to Harriet Torry at harriet.torry@wsj.com and Sarah Nassauer at Sarah.Nassauer@wsj.com