washington d.c.
CNN
—
Spending by U.S. retailers fell in March as the banking crisis heightened fears of a recession, causing consumers to retreat.
The U.S. Commerce Department reported on Friday that retail sales in March, which adjusts for seasonality rather than inflation, fell 1% from the previous month. The decline was higher than expectations for a 0.4% decline and higher than last month’s revised 0.2% decline, according to Refinitiv data.
Investors attributed some of the weakness to a lack of tax returns and concerns about a slowing labor market. Analysts at Bank of America said the IRS issued $84 billion in tax refunds in March this year, about $25 billion less than what will be issued in March 2022.
This has led to consumers spending less at department stores and on durable goods such as appliances and furniture. Spending at department stores fell 3% month-on-month in March, while spending at gas stations fell 5.5% over the same period. Excluding gas station sales, retail spending fell 0.6% in March from February.
However, retail spending increased 2.9% year-on-year.
Economists said smaller tax returns may have played a role in last month’s decline in retail sales and the expiration of enhanced food aid benefits.
“March is a very important month for refunds. Some may have expected a similar situation to last year,” Aditya Bhave, senior U.S. economist at Bank of America Global Research, told CNN.
Per-household credit and debit card spending tracked by Bank of America researchers slowed in March to its lowest level in more than two years, likely the result of reduced returns and expiration of benefits, as well as slower wage growth.
The expiration of enhanced pandemic-era benefits through the Supplemental Nutrition Assistance Program in February may also have dampened spending in March, according to a report by Bank of America Research Institute.
Data from the U.S. Bureau of Labor Statistics showed that average hourly earnings increased by 4.2% year-on-year in March, which was lower than the 4.6% annualized increase last month and the smallest annual increase since June 2021. The Employment Cost Index, a more comprehensive measure of wages, also showed gains in worker wages slowed last year. ECI data for the first quarter of this year will be released later this month.
Still, the U.S. labor market remains solid, despite losing momentum of late. Michelle Meyer, chief economist for North America at Mastercard Economics, said that could support consumer spending in the coming months.
“The overall picture remains favorable for consumers, given their 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 slower than the average monthly job growth rate in the previous six months, according to the Bureau of Labor Statistics. The latest monthly Job Openings and Labor Turnover Survey (JOLTS) report showed that the number of available jobs remained high in February but was down more than 17% from a peak of 12 million in March 2022, with revised data showing a weekly The number of people filing for unemployment benefits in the United States was higher than previously reported.
The job market is likely to cool further in the coming months. Federal Reserve Economist The U.S. economy is expected to slip into recession later this year The lagging effects of higher interest rates become even more profound. Before the collapse of Silicon Valley Bank and Signature Bank, Fed economists had predicted weak economic growth and the risk of a recession.
For consumers, the impact of last month’s banking turmoil has so far been limited. Consumer sentiment tracked by the University of Michigan worsened slightly during the bank collapse in March, but had shown signs of deterioration even before that.
The latest consumer confidence index released on Friday morning showed that consumer confidence remained stable in April despite the banking crisis, but higher gasoline prices helped push inflation expectations for the year ahead by a full percentage point, from 3.6 in March. % rose to 4.6% in April.
Joanne Hsu, director of consumer surveys at the University of Michigan, said in a press release that “online, consumers did not experience significant changes in the economic environment in April.”
“Consumers are anticipating a downturn and they won’t be as frustrated as they were last summer, but they are waiting for the other shoe to drop,” Hsu said in an interview with Bloomberg Television on Friday morning.
This story has been updated with background and additional details.
