US retail sales rise 0.1 pct. after tax increase

Published on NewsOK Modified: February 13, 2013 at 10:12 am •  Published: February 13, 2013
Advertisement
;

"Even so, it is nice to see that consumers didn't stumble out of the blocks," he said in a note to clients.

The Social Security tax increase was a key reason the Conference Board's index of consumer confidence plummeted last month to its lowest level in 14 months. That survey was taken early in the month, when most Americans were discovering their smaller paychecks.

But a separate survey taken later in the month by the University of Michigan suggested consumers weren't quite as dismayed, possibly after absorbing the impact of the tax increase.

Better hiring and rising prices for stocks and homes may boost consumer confidence and spending in the coming months.

Employers added an average of 200,000 jobs a month in the final three months of last year, the Labor Department said earlier this month. That was up from just 150,000 in the preceding three months.

And some retail store chains reported healthy sales gains last month, suggesting that at least some consumers kept shopping even after the tax cut kicked in. Some of the gains likely reflected healthy holiday discounts.

Overall, consumer spending grew at a faster pace in the final three months of last year than in the preceding quarter. Still, steep cuts in defense spending and slower company restocking weakened the economy.

The government said last month that the economy contracted in the October-December quarter at an annual rate of 0.1 percent.

But economists expect that figure will be revised in the coming months to show a small increase, after more data about last quarter has been reported. Economists at Barclays Capital estimate the economy expanded 0.5 percent in the fourth quarter.

Growth will likely pick up a bit in the January-March quarter to an annual rate of 1.5 percent, analysts forecast. That's better than the fourth quarter but below last year's expansion of 2.2 percent.