U .S. retail sales were sluggish in January as tax increases and higher gasoline prices restrained spending, suggesting a slowdown in the pace of consumer spending early in the first quarter.
According to figures released by the U.S. Commerce Department, retail sales edged up 0.1% after an unrevised 0.5% rise in December.
The modest gain suggested that households were responding to the expiration of a 2% payroll tax cut on January 1. Taxes also went up for so-called “wealthy” Americans.
So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, increasing by 0.1% after gaining 0.7% in December.
Consumer spending accounts for about 70% of the U.S. economy and grew at a 2.2% annual rate in the fourth quarter, the Commerce Department said. The pace is expected to slow this quarter as households adjust to smaller paychecks and higher gasoline prices.
Sales were mixed last month, with receipts at auto dealers slipping 0.1% after rising 1.2% in December. Excluding autos, retail sales increased 0.2% last month after advancing 0.3% in December. Sales at building materials and garden equipment suppliers rose 0.3%, reflecting gains in homebuilding as the housing market recovery shifts into higher gear. Sales of electronics and appliances gained 0.2%.