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Retail Sales Suffer A Temporary Setback In March

Written by Ken Gaebler
Published: 4/19/2013

Drop in consumer spending marks the largest monthly decline in nine months and may indicate a temporary loss of momentum in retail.

A recently released report by the Commerce Department shows that retail sales suffered a seasonally adjusted 0.4% decline in March compared to February figures, dampening an otherwise robust start for retail in 2013.

Retail Sales March Down

Although many economists see the decline as temporary, it is significant because it represents the largest month-over-month decrease in consumer spending in the past nine months.

Speculation about the causes of the March spending slump include changes in consumer sentiment following softening employment numbers, higher taxes and the possibility that the expired payroll tax holiday is finally causing consumers to keep a closer watch on their bank accounts and credit card purchases.

According to The New York Times, "The U.S. consumer looks a little less resilient," said Michael Feroli, an economist at JPMorgan Chase. "It now appears that close to $200 billion in higher taxes may have actually had some impact on consumer spending."

Spending categories significantly affected by the decline included auto sales (0.6%) and gas stations (2.2%), although lower fuel prices may have been a contributing factor behind the drop in gas station sales. Electronics, general merchandise, building materials and home furnishings also experienced notable monthly declines.

In response to sluggish consumer spending, some small business retailers may delay inventory restocking and possibly even decelerate new hiring or expansion initiatives. But for most small retailers, a better strategy may be to use customer feedback as a tool for acquiring new customers or to leverage marketing basics as a way to deepen relationships with their existing customer base.

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