After an alarming decline of 0.5% in March, retail spending has shown minor improvement in April, as sales showed a positive increase of 0.1% to $419 billion. In spite of this improvement, the Washington D.C.-based Conference Board predicts that the spring spending swoon will carry over to the summer.
According to the Conference Board, the spending swoon is a result of consumers going into deleveraging mode, paying off old debts while not taking on any new ones. Additionally, the swoon can be attributed to the delayed impact of higher payroll taxes and government spending cuts.
If the second half of 2013 brings more jobs and income growth, retail spending demand is expected to rise. The release of this pent-up demand is contingent on continued economic improvement from the end of the Great Recession nearly 4 years ago. The government has implemented sequesters and increased payroll taxes in hopes that fiscal policy will help the American economy recover.
The one percent jump in retail sales was driven by a 1% spike in car sales and a 4.7% gain in building material and garden supply stores. Along with increased sales, a higher demand for building supplies is also a positive sign for the ongoing housing recovery.
“Most economists had predicted a second consecutive month of slight declines…” commented Garrick Brown, Conference Board member. “Instead we saw a 0.1% increase. Though this isn’t much, it beats the alternative.” (CoStar, Yahoo!)
