Consumer Spending Restrained Thanks to Tax Hikes and Higher Gas Prices
Retail sales barely rose in January as tax increases and higher gasoline prices restrained spending, suggesting the economy got little help from the consumer at the start of the year.
The Commerce Department said on Wednesday retail sales edged up 0.1 percent after an unrevised 0.5 percent rise in December.
The modest gain, which was in line with economist’s expectations, suggested that households were responding to the expiration of a two percent payroll tax cut on January 1. Taxes also went up for wealthy Americans.
So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, ticked up 0.1 percent after gaining 0.7 percent in December.
“It adds to expectations that growth is likely to be lackluster in the opening quarter of the year, due mainly to the expiration of that payroll tax cut,” said Joe Manimbo, a senior market analyst at Western Union Business Solutions.
AAA notes that the average price for a gallon of regular gas nationwide has rise from $3.30 a month ago, to $3.52 today. That’s four cents more than it was last year, a record high price for the start of February.