Washington DC
CNN
—
Spending at U.S. retailers fell in March as consumers pulled back after the financial crisis sparked recession fears.
Retail sales, adjusted for seasonality and not adjusted for inflation, fell 1% from the previous month, the Commerce Department reported Friday. That was steeper than the expected 0.4% decline and steeper than the revised 0.2% decline the previous month, according to Refinitiv.
Investors cite weakness due to concerns over a lack of tax refunds and a slowing labor market. The IRS issued $84 billion in tax refunds this March, about $25 billion less than it issued in March 2022, according to BofA analysts.
As a result, consumers reduced spending on department stores and durable goods such as home appliances and furniture. Spending at general stores in March decreased by 3% compared to the previous month, and spending at gas stations also decreased by 5.5% during the same period. Excluding gas station sales, retail spending decreased 0.6% in March compared to February.
However, retail spending increased 2.9% year over year.
Economists say fewer tax returns, along with the expiration of enhanced food assistance benefits, likely contributed to the decline in retail sales last month.
“March is a really important month for refunds. “Some may have been expecting similar results to last year.” Aditya Bhave, senior U.S. economist at BofA Global Research, told CNN.
Per household credit and debit card spending tracked by Bank of America researchers eased in March at the slowest pace in more than two years. This is likely the result of declining revenues and expiring benefits, along with slowing wage growth.
Enhanced pandemic-era benefits provided through the Supplemental Nutrition Assistance Program expired in February, which may have delayed spending in March as well, according to a Bank of America Institute report.
Average hourly earnings rose 4.2% in March from a year ago, down from a 4.6% annual increase the previous month and the smallest annual increase since June 2021, according to figures from the Bureau of Labor Statistics. Worker wage growth slowed last year, according to the Employment Cost Index, a more comprehensive measure of wages. ECI data for the first quarter of this year will be released at the end of this month.
Nonetheless, the U.S. labor market remains strong despite a recent loss of momentum. Michelle Meyer, chief economist for North America at the Mastercard Economics Institute, said this could cause consumer spending to stagnate in the coming months.
“The big picture still favors consumers when you factor in income growth, balance sheets, and the health of the labor market,” Meyer said.
Employers added 236,000 jobs in March, a strong increase by historical standards but less than the average monthly pace of job growth over the past six months, according to the Bureau of Labor Statistics. The latest Monthly Jobs and Labor Turnover Survey (JOLTS) report shows that while the number of available jobs remained high in February, it was down more than 17% from a peak of 12 million in March 2022, and revised data shows weekly claims The number of cases and unemployment benefits in the U.S. was higher than previously reported.
The job market could cool further in the coming months. Federal Reserve economists expect the U.S. economy to fall into recession by the end of the year as the delayed effects of interest rate hikes deepen. Federal Reserve economists had predicted a slowdown in growth along with the risk of a recession before the collapse of Silicon Valley Bank and Signature Bank.
From the consumer's perspective, the impact of last month's turmoil in the financial industry has so far been limited. Consumer sentiment surveyed by the University of Michigan worsened slightly in March due to the bank failure, but had already shown signs of deterioration even before then.
The latest consumer sentiment figures released on Friday morning showed that consumer sentiment remained stable in April despite the banking crisis, but rising gasoline prices lifted expectations of future inflation by one percentage point to 4.6% from 3.6% in March. In April.
“On the Internet, consumers did not perceive any real changes in the economic environment in April,” Joanne Hsu, director of consumer research at the University of Michigan, said in a press release.
“Consumers are expecting a recession, and while it's not as depressing as it was last summer, they're waiting for the other shoe to drop,” Hsu told Bloomberg TV in an interview Friday morning.
This story has been updated to include context and details.