Retail spending fell in March as consumers pull back

Washington, DC
Cnn
–

American spending fell in March while consumers withdrew after the banking crisis fueled the fears of the recession.

Retail sales, which are adjusted for seasonality but not for inflation, dropped by 1% in March compared to the previous month, the trade department reported on Friday. This was more abrupt than a planned drop of 0.4%, according to Refinitiv, and above the revised decrease of 0.2% of the previous month.

Investors reduce part of the weakness of a lack of income tax and concerns about a slowdown in the labor market. The IRS issued $ 84 billion in tax reimbursements in March, about 25 billion dollars less than they issued in March 2022, according to Bofa analysts.

This has led consumers to retreat to expenses in department stores and on sustainable products, such as devices and furniture. Expenditure in general goods stores fell 3% in March compared to the previous month and spending at service stations decreased by 5.5% in the same period. By excluding sales of service stations, retail expenses fell 0.6% in March from February.

However, retail expenses increased 2.9% in annual shift.

Smaluation declarations of income have probably played a role in last month decrease in retail sales, as well as the expiration of improved food assistance benefits, according to economists.

“March is a really important month for reimbursements. Some people could expect something similar to last year,” Senior American economist at Bofa Global Research told CNN Aditya Bhave.

Credit card and household debit expenses followed by researchers from Bank of America moderated in March at its slowest rate in more than two years, which was probably the result of smaller yields and expired advantages, associated with slow wages.

The improved advantages of the pandemic era offered by the additional nutrition aid program expired in February, which could also have retained spending in March, according to a report from the Bank of America Institute.

Average hourly income increased by 4.2% in March compared to the previous year, against the annualized increase of 4.6% of the previous month and the smallest annual increase since June 2021, according to figures from the Bureau of Labor Statistics. The employment cost index, a more complete wage measure, also showed that workers’ remuneration gains have moderated last year. ECI data for the first quarter of this year will be published later this month.

However, the American labor market remains solid, even if it has lost momentum recently. This could maintain consumption spending in the coming months, said Michelle Meyer, chief economist in North America at the Mastercard Economics Institute.

“The situation as a whole is always favorable to the consumer when you think of their income growth, their balance sheet and the health of the labor market,” said Meyer.

Employers added 236,000 jobs in March, a robust gain compared to historical standards but smaller than the average monthly pace of employment growth in the previous six months, according to the Bureau of Labor Statistics. The latest monthly survey on job offers and labor turnover, or JOLTS report, has shown that the number of available jobs has remained high in February – but was down more than 17% compared to its 12 million peak in March 2022, and revised data showed that weekly complaints for American unemployment services were higher than that previously reported.

The job market could cool more in the coming months. Economists of the Federal Reserve Expect that the American economy is heading for a recession later in the year As the delayed effects of higher interest rates take a deeper hand. Fed economists had planned moderate growth, with risk of recession, before the collapse of Silicon Valley Bank and the signature bank.

For consumers, the effects of turbulence last month in the banking sector have been limited so far. The feeling of consumers followed by the University of Michigan worsened slightly in March during the bank’s failures, but he had already shown signs of deterioration before that.

The latest reading of consumers’ feeling, published on Friday morning, showed that feeling was stable in April despite the banking crisis, but that higher gasoline prices have contributed to increasing the expectations of one -year inflation by a full point, from 3.6% in March to 4.6% in April.

“On the net, consumers did not receive significant changes in the economic environment in April,” said Joanne Hsu, director of consumer surveys at the University of Michigan, in a press release.

“Consumers expect a slowdown, they do not feel as lamentable as last summer, but they are waiting for the other shoe to fall,” HSU told Bloomberg TV in an interview on Friday morning.

This story has been updated with the context and more details.