Apr 12 - U.S. consumers and businesses spent $418 billion in March, sending retail sales number into contraction for the second time in three months. Conway G. Gittens reports.
The Daily Digit is $418 billion..... consumers and businesses spent that much in March, according to the U.S. Commerce Department. The number tumbled for the second time in three months and is now at its weakest in nine months. The not-so-impressive $418 billion shopping bill suggests spending was considerably weaker in the first quarter than analysts believed. For Robert Brusca of Fact and Opinion Economics, it looks like consumers are grappling with less cash, blamed on the return of the social security tax, officially known as the Federal Insurance Contribution Act - or FICA. SOUNDBITE: ROBERT BRUSCA, CHIEF ECONOMIST, FACT AND OPINION ECONOMICS (ENGLISH) SAYING: "Looks like consumer incomes may have slowed down. Certainly, wages are not advancing at a very rapid pace right now. It's a little bit hard to tell what's going on with incomes because we had that dividend spike at the end of the year that went up and went down, so it's a little bit hard to get a really good fix on personal income. But we know that disposable income is more of an issue because the government is having people kick into their FICA the way they were not - lower-income people - for a while. And we know that there are several things that are retarding income growth." Sales fell 0.4 percent in March, missing analysts' expectations for a flat reading. Retail numbers have been volatile this year, making it difficult to know how much of last month's weakness was due to higher taxes and how much might be because of temporary factors related to the weather. Another report, the Thomson Reuters/University of Michigan's preliminary reading of consumer sentiment, tumbled in April, and that too might be tied to higher taxes. SOUNDBITE: ROBERT BRUSCA, CHIEF ECONOMIST, FACT AND OPINION ECONOMICS (ENGLISH) SAYING: "People rated their expectations for personal finances so low that they are lower than this less than five percent of the time, historically. Less than five percent of the time. This is an important and significant event. People are very concerned about what's going to happen in the future." Washington's austerity drive could subtract about 1.5 percentage points from economic growth this year, according to an estimate by the non-partisan Congressional Budget Office - a decline that is already showing early signs of hitting consumers where it hurts the most -their wallets.