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Why Retail Sales Declined In March

NEW YORK (TheStreet) -- Wallets and pocketbooks snapped shut last month, as consumers decided the timing just wasn't right to buy that new tablet computer or patio set.

Why the trepidation? Everyone seems to have a theory.

What's beyond debate is the fact that March retail sales fell to $418.3 billion, a decline of 0.4% from February, according to the U.S. Commerce Department. It's the second soft showing in three months, and that has economists and politicians perspiring over what that means to the U.S. economy.

If there's any good news in that retail number, it's that retail sales are still 2.8% higher than in March 2012. But the past 90 days have shown a decidedly downward trend as U.S. consumers pull back on spending.

The National Retail Federation points to "colder weather and harmful fiscal policy" as the chief reasons for the slide in retail sales.

"The fall-off in spending is no surprise," says NRF Chief Economist Jack Kleinhenz. "A colder than usual winter, an anemic employment picture and delays in tax refunds impacted consumer spending across the board in March. While we remain optimistic that retail sales will grow modestly this year, it seems like the economy is off to a shaky start as we enter the second quarter. Improving housing prices and lower gas prices may help to offset the toll of increased taxes and sequester."

That seems like a reasonable take until you factor in that February was as cold and miserable as January in most of the U.S., and that didn't stop Americans spending.

In addition, the payroll tax hike was triggered in the first week of January, but retail were stronger in January or February than in March - 60 to 90 days after the tax hike went into effect. That shows Americans weren't too worried over the 2.3% payroll tax that rolled out in early January.

Another, more timely factor may have been repeated talk of horror stories related to the sequester debate, when politicians warned of dire outcomes linked to scheduled cuts in federal government spending starting in March.

Instead of shrugging off those warnings from Washington pols, the retail sales numbers suggest Americans took those threats of economic decline to heart in the first few weeks of March, opting to stay on the sidelines for the month.

Whatever the reason, the NRF says future growth in retail sales depends on the U.S. government getting its act together, and start enacting some pro-growth policies.

"Retail is the vehicle that drives our economy, and the consumer dictates the speed," NRF President and CEO Matthew Shay says. "With consumer confidence low, Washington decision-makers need to focus on a long-term, economic roadmap that creates fiscal certainty for American families. And we need policies that encourage job growth and capital investment by business generally and the retail industry specifically, an industry that supports one in four American jobs. Without either, economic recovery will continue to sputter along, and the consumer will keep their foot off the pedal."

That certainly was the case in March, which means the April retail numbers could be one of the most important, and closely scrutinized, indicators of the U.S. economy in months.

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