Here’s some good news for the US economy: Americans are still spending money, and they’re doing it more than economists expected. In February, retail sales climbed 0.6% compared to the previous month, beating predictions of a 0.4% increase. This uptick comes after three straight months of declines, suggesting that consumers haven’t hit their spending limit just yet, even as job growth remains sluggish and overall consumer confidence stays low.

What makes this data particularly interesting is where people are actually spending their cash. Department stores saw the biggest jump with a 3% increase, while personal care shops and clothing retailers also saw solid gains of 2.3% and 2% respectively. The only categories that took a hit were grocery stores and furniture retailers, each dropping 1%. For folks who follow the economy closely, this spending pattern hints that people are still confident enough to invest in non-essential purchases.

Economists are particularly paying attention to something called the “control group”, a measure that excludes volatile categories like cars, gas, and building materials. This metric rose 0.45% in February, exceeding expectations of 0.3%. Think of this as the true barometer of everyday consumer demand, and it’s showing healthier activity than anticipated.

Why does all this matter? Consumer spending accounts for roughly two-thirds of the entire US economy. When people stop buying things, the whole system feels the impact. Over the past year, spending has become closely tied to the job market itself. When layoffs spike, spending drops. When people feel secure in their jobs, they open their wallets. Right now, new unemployment claims remain at historically low levels, even though job growth has been pretty underwhelming.

But there’s a shadow looming over this economic picture. At the end of February, the United States and Israel launched a war with Iran, which is now in its fifth week. This conflict poses a real threat to inflation and could slow economic growth, the longer it continues, the worse that risk becomes. President Donald Trump indicated the war could wrap up in two to three weeks and was scheduled to address the nation on the situation.

The real test for the economy will come when the Bureau of Labor Statistics releases the monthly jobs report for March this Friday. That data will show whether job growth is holding steady, wages are keeping pace, and what the unemployment rate actually looks like. Heading into 2026, most economists and investors expected the labor market to stay relatively stable, just at a weaker level than previous years. The Middle East conflict could change those projections significantly.

For now, the February retail sales numbers suggest American consumers still have some juice left, even if they’re navigating uncertain times.