Tax cuts halt 3-month retreat in US retail sales

Bloomberg

Tax cuts have given a boost to Americans’ take-home pay this year. The question hanging over the US economy is whether they are putting the extra cash towards savings and debt, or using it to go shopping.
Retail-sales data due on Monday from the Commerce Department will help provide an answer, and economists are betting that consumers finally opened up their wallets a little wider, thanks in part to the boost in paychecks as well as 2017 tax refunds from Uncle Sam.
Sales probably rose 0.4 percent in March from the prior month, based on the median estimate of analysts.
That would break a streak of three declines that was the longest such dip since 2015 and reflected the hangover from a debt-fuelled, post-hurricane spending binge in the fourth quarter.
“The economy continues to create jobs in significant numbers and tax cuts are putting more money in households’ pockets,” ING chief international economist James Knightley wrote in a note.
“We suspect the cash flow story will win out for now, implying a positive outlook for consumer spending.”
A rebound in retail sales would be a sign that President Donald Trump’s tax cuts are helping spur growth in an economy largely reliant on consumer spending.
Trump and the Republican-led Congress also slashed corporate taxes, a move partly meant to spur wages, which have yet to move significantly higher.
Americans had reined in spending in the previous three months, disappointing market watchers and likely culminating in a relatively soft first quarter for consumer spending.
That’s kept estimates for economic growth in check, with analysts
forecasting that gross domestic product expanded at a 2.2 percent annualised pace in the January-March period, down from 2.9 percent in the previous quarter.