WASHINGTON — With the higher payroll tax starting to kick in, retail sales rose in January at their smallest rate in three months. Consumers pulled back a bit on their purchases of cars, clothes and home furnishings, the government said.
Overall, retail sales ticked up a modest 0.1% last month from December, after gains of 0.5% in each of the prior two months. The subdued January performance was in line with consensus forecasts, as many analysts were expecting a drop-off in the growth rate after the expiration of the payroll tax holiday, which translates to about $40 less in take-home pay for the average worker every two weeks.
The latest Commerce Department figures, which came out Wednesday, are consistent with other indicators showing a weakening of consumer confidence at the start of this year, even as Americans are becoming somewhat more comfortable using credit again, said Kathy Bostjancic, an economist at the Conference Board.
Still, given the bigger bite in the payroll tax and higher income taxes for the wealthy, plus the recent jump in gas prices, some economists found it encouraging that there was any growth at all in retail sales last month. Analysts say the near-term outlook is for more modest gains in retail sales.