Comment on U.S. Bureau of Census Retail Sales Report

Kathy Bostjancic, Director of Macroeconomic Analysis, The Conference Board

Spending Dips After Winter Surge

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Apr 12, 2013, 09:05 ET

NEW YORK, April 12, 2013 /PRNewswire/ -- The following is a comment on the U.S. Bureau of Census Retail Sales Report from Kathy Bostjancic, Director of Macroeconomic Analysis, The Conference Board:

With a decline of 0.4 percent in March, consumers are pulling back after a winter surge powered by the strong release of pent-up demand. To finance the winter spending spree, consumers temporarily interrupted the deleveraging of their balance sheets (paying down old debt and refraining from adding new debts) and drove their personal savings rate down. The March spending data suggest consumers are more worried about the economy under the government's spending sequester and are feeling the delayed financial impact of the increase in the payroll tax rate, which makes them return to deleveraging and savings. We expect the fiscal headwinds from the sequester, the higher tax rates, and a still sluggish labor market will keep consumer spending on a slow path for the next few months. It is not likely until 2014 that we will see a return to solid consumer spending. By that time, the fiscal headwinds will have somewhat abated and income gains should be moderately firmer as the labor market continues to gradually improve.

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