The Commerce Department’s January retail sales report reveal that consumers are burdened by payroll tax increases and higher gasoline prices.
“The modest gain, which was in line with economist’s expectations, suggested that households were responding to the expiration of a two percent payroll tax cut on January 1. ” Reuters reports.
“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.
Consumer spending accounts for around 70 percent of the U.S. GDP, which grew at a 2.2 percent annual rate in the fourth quarter.
Households are facing smaller paychecks and gasoline prices are on the rise, which bodes negatively for this quarter’s economic growth.