"It adds to expectations that growth is likely to be lackluster in the opening quarter of the year, due mainly to the expiration of that payroll tax cut"
- Joe Manimbo, a senior market analyst at Western Union Business Solutions
U.S. consumers increased their purchases of retail goods in January at a slower pace, suggesting that an increase in payroll taxes took a bite out of consumers' pay checks. The report by the Commerce Department showed that the U.S. retail sales edged up only 0.1% after an unrevised 0.5% rise in December. During the 2012 retail sales have risen an unadjusted 4.4%, more than twice the rate of consumer inflation. Taxes on working Americans went up 2% last month, after the end of a tax break put in place two years ago to spur the struggling economy. A slowdown in the consumer spending, which accounts for as much as 70% of the U.S. economy, as well as in sales at retailers, which represent about one-third of that consumption, is adding to concerns that the U.S. economy cannot rely on the consumer spending at the beginning of the year.
"It adds to expectations that growth is likely to be lackluster in the opening quarter of the year, due mainly to the expiration of that payroll tax cut," said Joe Manimbo, a senior market analyst at Western Union Business Solutions.
"The payroll tax increase is having some impact on spending here," said Thomas Simons, an economist with Jefferies Group Inc. in New York, whose firm after today's report is the second-best forecaster of retail sales for the past two years.
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