Washington DC
CNN
–
Expenditures at US retailers fell in March as consumers pulled back after the banking crisis spurred fears of a recession.
The Commerce Department reported on Friday that retail sales, which were seasonally adjusted from the previous month to March, fell 1% from the previous month. This was sharper than the expected 0.4% decline, exceeding the previous month's revised 0.2% decline, according to Refinitiv.
Investors choke some of their weaknesses in a lack of tax returns and lack of concerns about slowing the labour market. According to analysts at BOFA, the IRS issued a $84 billion tax refund in March this year, about $25 billion less than it issued in March 2022.
This led consumers to recoup their spending on department stores, furniture and other durable goods. Expenses at general merchandise stores fell 3% from the previous month in March, while gas stations fell 5.5% over the same period. Excluding gas station sales, retail spending fell 0.6% from February to March.
However, retail spending rose 2.9% year-on-year.
According to economists, fewer tax returns may have played a role in lower retail sales last month and in addition to lower retail sales.
“March is a really important month for refunds. Some people may have been expecting something similar to last year,” Aditya Bhave, a US economist at Bofa Global Research, told CNN.
Household credit and debit card spending tracked by Bank of America researchers eased to the slowest pace in March in more than two years. This could be a result of slower wage growth, coupled with lower rates of return and expired.
The strengthening of benefits in the pandemic era provided through the Supplementary Nutrition Assistance Program, which expired in February, may have reduced spending in March as well, according to a report by the Bank of America Institute.
According to figures from the Bureau of Labor Statistics, average hourly revenues rose 4.2% in March of the previous year, from an annual increase of 4.6% in the previous year and an annual lowest increase since June 2021. The Employment Cost Index, a more comprehensive measure of wages, also shows that workers' salary benefits have been eased over the past year. ECI data for the first quarter of this year will be released later this month.
Still, despite the recent loss of momentum, the US labor market remains solid. Michelle Meyer, chief North American economist at the Mastercard Economics Institute, said this would help reduce consumer spending in the coming months.
“When you think about their income growth, their balance sheet, and labor market health, the big picture is still advantageous for consumers,” Meyer said.
Employers added 236,000 jobs in March. This is a robust profit from historical standards than the average monthly employment growth pace over the past six months, according to the Bureau of Labor Statistics. The latest monthly job openings and labor withdrawal survey (Jolts Report) showed that the number of jobs available remained rising in February, but fell by more than 17% from the peak of 12 million in March 2022, with revised data showing that unemployment rates in the US were higher than previously reported.
The job market could be cooler in the coming months. Federal Reserve economists hope that the US economy will head into a recession later in the year as the delayed impact of higher interest rates will be deeper. Fed economists had predicted restrained growth with risk of recession before the collapse of Silicon Valley Bank and Signature Bank.
For consumers, the impact of turbulence in the banking industry last month has been limited so far. Consumer sentiment tracked by the University of Michigan, which worsened slightly in March during the bank's failures, had already shown signs of degradation before that.
The latest consumer sentiment reading, released Friday morning, showed sentiment steady in April despite the banking crisis, but the rise in gas prices showed that it was a full percentage boost to annual inflation forecasts, rising from 3.6% in March to 4.6% in April.
“Online, consumers were not aware of any significant changes in the economic environment in April,” Joan Huss, director of the University of Michigan Consumer Research, said in a news release.
“Consumers are hoping for a recession. They aren't as bad as last summer, but they're waiting for other shoes to fall,” HSU said in an interview Friday morning.
This story has been updated with context and details.