Consumers hesitant to spend despite tax cuts

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Advance retail sales excluding food services over the past year, seasonally adjusted, shown as percent change from the preceding month. Source: U.S. Bureau of the Census and Federal Reserve Bank of St. Louis Economic Data.  

Advance retail sales excluding food services over the past year, seasonally adjusted, shown as percent change from the preceding month. Source: U.S. Bureau of the Census and Federal Reserve Bank of St. Louis Economic Data.  

Automobile sales helped drive a retail sales rebound in March, but the growth was sluggish despite higher employment and bigger paychecks, The Wall Street Journal is reporting.

Retail sales — a measure of outlays at stores, restaurants and websites — increased a seasonally adjusted 0.6 percent in March from the prior month, the Commerce Department said Monday, beating economist expectations, according to WSJ.

A bump in auto sales helped drive the overall rise in retail spending. Excluding vehicles, sales were up 0.2 percent last month. Excluding both autos and gasoline, sales rose 0.3 percent in March from the prior month.

Part of the rise in retail sales was an expected comeback after three consecutive months of weak readings. In February, sales dropped 0.1 percent after a 0.2 percent drop in January and a 0.1 percent decline in December.

“Retail sales rose for the first time in March, but the report was nothing to write home about,” wrote Gus Faucher, chief economist at PNC Financial Services Group, in a note to clients. “Consumer spending is growing at a moderate pace.”

Data on retail sales can be volatile from month to month, aren’t adjusted for inflation and don’t include spending on most services such as housing and health care.

Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output.

A strong labor market, buoyant consumer confidence and the recent tax cuts offer a favorable outlook for spending patterns, said Mark Frissora, chief executive at gambling behemoth Caesars Entertainment Corp., in a March earnings call with analysts.

The article linked to a video talking about the major shift to e-commerce that retail is undergoing right now.

Though e-commerce has more than tripled in the past decade, it still accounts for only 17 percent of all retail sales. Check out the 2-minute video here.

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