Feb. 13 - Higher payroll tax and gas prices are hitting the American shopper in the wallet and slowing retail sales. Conway G. Gittens reports.
Slow going to the new year at U.S. malls and other retail outlets and the rest of the year might not be that much better. Retail sales grew an expected 0.1 percent in January, according to the Commerce Department, after a lackluster holiday shopping season at best. The new year brought with it the return of a 2 percent payroll tax and an unwelcomed surprise for consumers- a 10 percent jump at the pump, reasons enough to be concerned about the pace of consumer spending this year, says Lord Abbett senior economist and market strategist Milton Ezrati. SOUNDBITE: MILTON EZRATI, SENIOR ECONOMIST/MARKET STRATEGIST, LORD ABBETT (ENGLISH) SAYING: "My three fears about the consumer are that the employment growth will be slow and will probably remain slow. Business is being cautious for any number of reasons. The second concern I have is that perhaps this, the effects of this tax hike, or the end of a tax break would be more accurate way to put it, will linger longer than I would have thought. If the price of gasoline levels out here, the consumer will eventually adjust." But that adjustment could be painful. According to AAA, the average price of regular gasoline is $3.62 a gallon, setting a new record for this date, up from $3.51 the same day in 2012. And this after households spent more last year on gasoline than any time in history, according to the Energy Information Administration. That shift in dollars - resulting in flat spending at restaurants and bars last month and despite a resurging housing market - furniture sales were down 0.2 percent. Consumers, however, haven't totally shut their wallets - a good thing since 70 percent of all economic activity rests on the mighty shopper. The strongest growth of all categories last month was general merchandise, with department store sales up a full percent. SOUNDBITE: MILTON EZRATI, SENIOR ECONOMIST/MARKET STRATEGIST, LORD ABBETT (ENGLISH) SAYING: "I think the consumer is going to be a slow contributor to economic growth. I think we are going to probably avoid a recession this year. In fact, I'm almost certain of that, but it's going to continue this slow pace that we've been at since this recovery began." Barring any shocks, the National Retail Federation is forecasting sales outside of auto dealerships, gasoline stations and restaurants to rise 3.4 percent this year, slower spending than last year, as Main Street waits for a stronger economy to take shape.