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American consumers started the year on shaky footing but a bounce back could be in sight.

February’s retail sales data will be in focus today and should bring insight into the state of the U.S. economy.

“Even as we anticipate a moderation in spending this year, we believe the January slowdown somewhat overstates the near-term pullback in consumption. Households are still benefiting from a real income tailwind that should remain supportive of spending in the near term,” Wells Fargo wrote in a note.

“We expect to see a rebound in February spending and forecast retail sales advanced 0.8%.”

Consumer strength has underpinned overall economic growth and has proven far more resilient than most policymakers and economists predicted.

Yet, sticky inflation could take a toll and risk growth prospects ahead.

“The case for a gradual but sustained slowdown in growth in consumers’ spending from 2023’s robust pace is persuasive,” wrote Pantheon Macroeconomics in a note.

“Most households have run down the excess savings accumulated during the pandemic, while the cost of credit has jumped and last year’s plunge in home sales has depressed demand housing-related retail items like furniture and appliances.”

Investors will also be watching out for February’s producer prices due today, any upside surprises like January’s hot print could further complicate the inflation picture for the Fed.  

The report is the last major piece of economic data to be released prior to the central bank’s policy meeting next week.