Post-Holiday Spending Dips on Higher Tax Rates

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

Kathy Bostjancic, Director of Macroeconomic Analysis, The Conference Board

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Feb 13, 2013, 09:04 ET

NEW YORK, Feb. 13, 2013 /PRNewswire/ -- With a gain of 0.1 percent in January, post-holiday retail spending started the year at a subdued rate. Consumer confidence has turned more negative as many workers' after-tax income declined with the expiry of the temporary reduction in the payroll tax cut with the start of the New Year. However, automotive vehicle purchases have remained robust. It would appear that non-vehicle related spending was curtailed in part to keep debt levels under control, even though consumers are becoming a bit more comfortable using credit again. Going forward, gains in employment that translate into increased spending power will be the key to boosting sentiment and nonvehicle spending. If the labor market improves over the next few months, January's retail sales could prove to be an aberration stemming in large part from the sticker shock of higher taxes in January.

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