Retail Sales Growth Slows As Higher Taxes Kick In

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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.

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