Washington DC
CNN
—
Spending at US retailers fell in March as consumers retreated after a banking crisis sparked fears of a recession.
The Commerce Department reported on Friday that retail sales, adjusted for seasonality but not for inflation, fell 1% in March from the previous month. According to Refinitiv, that was higher than the 0.4% decline expected and higher than the revised 0.2% decline in the previous month.
Investors attribute some of the weakness to a lack of tax returns and concerns about a slowing 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.
That led consumers to reduce spending at department stores and durable goods, such as appliances and furniture. Spending at department stores fell 3% in March from the previous month, and spending at gas stations fell 5.5% in the same period. Excluding gas station sales, retail spending fell 0.6% in March from February.
However, retail spending increased 2.9% year-over-year.
Economists said smaller tax returns likely played a role in last month’s drop in retail sales, along with the expiration of enhanced food assistance benefits.
“March is a really important month for refunds. Some might have expected 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 in March fell to its slowest rate in more than two years, which could be the result of a profit margin. less profits and expiring benefits, along with slower wage growth.
The enhanced pandemic benefits offered through the Supplemental Nutrition Assistance Program expired in February, which may also have held back spending, according to a report by the American Banking Institute. spend in March.
Average hourly earnings rose 4.2% in March from a year earlier, down from the previous month’s 4.6% annual gain and the smallest annual gain since June 2021. according to data from the Bureau of Labor Statistics. The Cost of Employment Index, a more comprehensive wage gauge, also shows that workers’ wage growth has moderated over the past year. ECI data for the first quarter of this year will be released later this month.
However, the US labor market remains stable, although it has recently lost momentum. That could hold back consumer spending in the coming months, said Michelle Meyer, chief economist for North America at the Mastercard Institute of Economics.
“The overall picture remains favorable for consumers when you think about earnings growth, balance sheet and labor market health,” Meyer said.
According to the Bureau of Labor Statistics, employers added 236,000 jobs in March, a sharp increase by historical standards but below the average monthly employment growth rate for the previous six months. The latest Monthly Job Openings and Labor Turnover, or JOLTS report, shows job availability still increased in February — but down more than 17% from its peak in February. 12 million in March 2022, and revised data shows a higher number of weekly US jobless claims than previously reported.
The job market could cool further in the coming months. Economists at the Federal Reserve predicts the US economy will fall into recession by the end of this year when the lagging effects of higher interest rates are more profound. Fed economists had forecast weak growth, with a risk of recession, ahead of the collapse of Silicon Valley Bank and Signature Bank.
For consumers, the effects of last month’s turmoil in the banking industry have been limited so far. Consumer sentiment tracked by the University of Michigan deteriorated slightly in March during the bank failure, but it showed signs of worsening before that.
The latest consumer sentiment data, released on Friday morning, showed consumer sentiment remained stable in April despite the banking crisis, but higher gasoline prices helped push inflation expectations back to the next level. inflation next year increased by one percentage point, rising from 3.6% in March to 4.6% in April.
“Online, consumers did not notice significant changes in the economic environment in April,” said Joanne Hsu, director of consumer surveys at the University of Michigan.
“Consumers are expecting a recession, they don’t feel as bleak as last summer, but they are waiting for another shoe to drop in price,” Hsu told Bloomberg TV in an interview on Friday morning. .
This story has been updated with more context and details.
