Washington DC
CNN
–
Spending by US retailers fell in March after fears of a recession in the wake of the banking crisis pushed back consumers.
Retail sales, which are adjusted for seasonality but not inflation, fell 1% in March from the previous month, the Commerce Department said Friday. This was higher than the 0.4% decline expected by Refinitiv and higher than the revised 0.2% decline in the previous month.
Investors find some weakness in concerns about a lack of tax returns and a sluggish labor market. According to BofA analysts, the IRS issued $84 billion in tax refunds this March, about $25 billion less than it issued in March 2022.
This forces consumers to retreat to department stores and spend on durable goods such as appliances and furniture. Spending at general merchandise stores fell 3% in March from the previous month, and spending at gas stations fell 5.5% over the same period. Excluding gas station sales, retail spending fell 0.6% in March from February.
However, retail spending rose 2.9% year-on-year.
Economists say smaller tax returns likely played a role in last month’s decline in retail sales as extended food assistance benefits expire.
“March is a really important month for refunds. Some people may be expecting something similar to last year,” Aditya Bhave, senior US economist at BOFA Global Research, told CNN.
Credit and debit card spending per household tracked by Bank of America researchers slowed in March to its slowest pace in more than two years, likely combined with wage growth driven by smaller incomes and expired benefits.
Extended pandemic-era benefits provided through the Supplemental Nutrition Assistance Program expired in February, which could also halt spending in March, according to a Bank of America Institute report.
According to data from the Bureau of Labor Statistics, average hourly earnings rose 4.2% from a year earlier in March, down from the previous month’s 4.6% annual increase and the smallest annual increase since June 2021. The Employment Cost Index, a more comprehensive measure of wages, also showed that wage gains for workers moderated this past year. ECI data for the first quarter of this year will be released later this month.
Still, the US labor market remains firm, although it has lost momentum recently. That could hold consumer spending in the coming months, said Michelle Meyer, chief North American economist at the MasterCard Economics Institute.
“The big picture is still favorable when you think about consumer income growth, their balance sheets and the health of the labor market,” Meyer said.
According to the Bureau of Labor Statistics, employers added 236,000 jobs in March, a strong gain by historical standards but smaller than the average monthly pace of job growth in the previous six months. The latest monthly Job Openings and Labor Turnover Survey, or JOLTS report, showed that the number of available jobs rose in February — but was down more than 17% from March 2022’s peak of 12 million, and revised data showed weekly claims for U.S. unemployment benefits were higher than previously reported. was more than
The job market may get colder in the coming months. Economist at the Federal Reserve The US economy is expected to enter recession by the end of the year The lagged effects of high interest rates hold deep. Before the collapse of Silicon Valley Bank and Signature Bank, Fed economists had predicted a slowdown in growth, along with the risk of a recession.
For consumers, the impact of last month’s turmoil in the banking industry has so far been limited. Consumer sentiment tracked by the University of Michigan worsened slightly in March during the bank failure, but it had already shown signs of deterioration before that.
The latest consumer sentiment readings released Friday morning showed sentiment held steady in April despite the banking crisis, but higher gas prices helped push up year-ago inflation expectations by a full percentage point, rising to 4.6% from 3.6% in March. In April.
“On net, consumers did not perceive material changes in the economic environment in April,” Joan Huss, director of consumer surveys at the University of Michigan, said in a news release.
“Consumers are expecting a recession, they’re not feeling depressed like last summer, but they’re waiting for the other shoe to drop,” Shue said in an interview with Bloomberg TV on Friday morning.
This story has been updated with context and more details.
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