Consumer Spending Plummets After Payroll Tax Increase...

[paulitician]

When President Barack Obama and Congress agreed to increase the federal payroll tax by two percent to temporarily avert the so-called fiscal cliff in January, Americans were left with less money to spend. Now, some of the country's largest companies are seeing sales plummet as a result.

On top of high gas prices, job uncertainty, and stagnant wages, the payroll tax cut expiration, which increased that tax by 2%, will "ding a household with $65,000 in annual income $1,300 this year." Citigroup estimates the payroll tax increase will take "$110 billion overall out of consumers' hands."

According to the Wall Street Journal, companies like WalMart, Burger King, Kraft Foods, and Tyson Foods have said they are lowering earnings forecasts and "adjusting sales and marketing strategies, expecting consumers with smaller paychecks to dine out less and trade down to less expensive purchases."

Even worse, these companies believe the "changes could be long-lasting and are revamping operations" to cater to a consumer base that is spending less, which does not bode well for the sputtering economy.

Retail experts agree, telling the Journal that what happens at companies like WalMart is often a leading indicator for the rest of the retail economy.

The U.S. Commerce Department estimated sales in January "rose at their smallest rate in three months," and companies like WalMart and Burger King do not expect sales to get better anytime soon.

Consumer Spending Plummets After Payroll Tax Increase

 

[SteadyMercury]

How much has consumer spending gone down? Your thread title is saying "plummets" does that mean Q1 consumer spending will be down 30% or something?

Your article mentions WalMart lowering estimates, but it hardly seems like plummeting, seems like flat:

The world's largest retailer forecast flat same-store sales for its U.S. division in the current quarter, reflecting the economic strain on its customers. Wal-Mart's lower-income customers are grappling with higher payroll taxes, rising gasoline prices and delayed income-tax refunds.

Your article also mentions Kraft foods, but all I could find was them raising estimates as of Feb 15, from Kraft Foods expects profit to top estimates | News-Gazette.com

The company, whose brands include Oscar Mayer and Miracle Whip, also raised its 2013 earnings forecast Friday and announced that it will look to level out annual pension contributions after this year.
...
For 2013, Kraft now expects earnings of about $2.75 per share, up from approximately $2.60 per share. Analysts expect $2.66 per share.

For January retail spending slowed, but it still grew slightly. Either way hardly a plummet Retail sales growth slows as higher taxes kick in | Reuters

(Reuters) - Retail sales barely rose in January as tax increases and higher gasoline prices restrained spending, setting up the economy for only modest growth in the first quarter. The Commerce Department said on Wednesday retail sales edged up 0.1 percent after a 0.5 percent rise in December.

I'm not doubting the termination of the temporary ss payroll tax reduction will hurt spending, I'm just curious where the evidence of this "plummeting" you are reporting is coming from.

 

[william the wie]

The sources I trust claim that the speed of the switch to internet sales has picked up markedly. Barnes & Noble is closing stores as is Books A Million. Amazon and Ebay are even pushing into some foods. Amazon even recently took over a robotics company and that means that frozen food warehouses will be cheaper to run so they can takeover the grocery space.

That is leading to major job losses.

 

[Mad Scientist]

Wait a minute. Are you saying that when the Gov't takes money from us that we have less to spend and therefore the Economy slows?

Where have I heard that before?

 

[Wiseacre]

Don't know about plummeting, but according to a recent survey sponsored by the National Retail Federation nearly 75% of the responders say they will cut back their spending. Why? Partly the payroll tax changes, higher prices at the pump, and perhaps worries about budget cuts at every gov't level and the possibility of job losses or reduced hours.

According to the article, Walmart confirms they started seeing signs of a pullback in mid-January and their February sales are so far lower than expected.

snippet:

Almost half of the 5,185 people polled said they planned to spend less on overall purchases, about a third said they would reduce dining out, while about a quarter said they would reduce entertainment, vacation and travel plans.

Other popular cutting-back strategies included holding off on major purchases, like cars and furniture (24.4%), decreasing energy expenses by driving less or turning down the thermostat (23.4%), and spending less on everyday splurges like coffee-shop lattes or trips to the nail salon (24.5%).

Crunched consumers are cutting back: survey - Feb. 21, 2013

All of which could add up to a relatively poor growth report for the 1st qtr of 2013. And maybe more UE too.

 

[EdwardBaiamonte]

Amazon even recently took over a robotics company and that means that frozen food warehouses will be cheaper to run so they can takeover the grocery space.

That is leading to major job losses.

dear if inventing cheaper ways to do things, like farming with a plow and large animal, rather than by hand led to job losses there would be no jobs today.

Did you notice there are many jobs????

 

[EdwardBaiamonte]

Wait a minute. Are you saying that when the Gov't takes money from us that we have less to spend and therefore the Economy slows?

Where have I heard that before?

They call that Republican capitalist supply-side economics I'm afraid

 

[paulitician]

The IRS gonna be all up in everyone's business in the coming years. We'll see if the Socialists/Progressives enjoy what they've created. Because the Taxman is coming for them too. Bet on that.

 

[Rozman]

Wait a minute. Are you saying that when the Gov't takes money from us that we have less to spend and therefore the Economy slows?

Where have I heard that before?

The economy thrives when we are taxed to hell and back and unemployment is high.

 

[EdwardBaiamonte]

Wait a minute. Are you saying that when the Gov't takes money from us that we have less to spend and therefore the Economy slows?

Where have I heard that before?

The economy thrives when we are taxed to hell and back and unemployment is high.

yes this is no time for austerity!! Lets raise taxes so the government can spend more and we can spend less!

 

[SteadyMercury]

The IRS gonna be all up in everyone's business in the coming years. We'll see if the Socialists/Progressives enjoy what they've created. Because the Taxman is coming for them too. Bet on that.

I'm still waiting on how you rationalize describing flat growth projections and a slight rise in consumer spending as "Consumer Spending Plummets" in a thread title. Sensationalist much? Where exactly is the plummeting you speak of?


Just saw this in today's paper: Shoppers are buying even with higher tax - USATODAY.com

Despite warnings last week from Wal-Mart and other companies about flat sales this quarter and more price-conscious shoppers, consumers look surprisingly resilient. Some economists say spending looks better than they expected considering what's been thrown at consumers in the first two months of the year: a payroll tax hike on Jan. 1, late tax refunds and a 44-cent-a-gallon increase in average gasoline prices since New Year's Eve.

"The hard data we follow as economists has held up better than we thought," said Citigroup economist Steven Wieting. "The spending letdown has been remarkably small."

 

[EdwardBaiamonte]

The sources I trust claim that the speed of the switch to internet sales has picked up markedly. Barnes & Noble is closing stores as is Books A Million. Amazon and Ebay are even pushing into some foods. Amazon even recently took over a robotics company and that means that frozen food warehouses will be cheaper to run so they can takeover the grocery space.

That is leading to major job losses.

well then we should ban all robots and in fact all labor saving tools. We could replace earth moving equipment with spoons. Imagine the jobs that would create!!!


Now come on, how can anyone conclude liberals are not slow, so very very slow???

 

[paulitician]

The Taxman is locked & loaded. He's gonna be very very busy in the coming years. Thanks a lot Big Government stooges.

 

[EdwardBaiamonte]

The Taxman is locked & loaded. He's gonna be very very busy in the coming years. Thanks a lot Big Government stooges.

yes the last I read said the IRS had hired 15,000 new agents!!

 

[SteadyMercury]

The Taxman is locked & loaded. He's gonna be very very busy in the coming years. Thanks a lot Big Government stooges.

In other words you cannot support your own thread about plummeting spending, realize that, so are now reduced to throwing random gibberish about taxes instead of addressing your own post when questioned.

 

[KissMy]

The tax increase was not as big of a hit as the delayed tax refund was. The federal income tax increase affected way less than half the country because 47% of shoppers don't pay federal income taxes. Few shoppers had an increase in federal income tax. However increasing the social security tax paid by all workers did have a affect.

 

[Rshermr]

The IRS gonna be all up in everyone's business in the coming years. We'll see if the Socialists/Progressives enjoy what they've created. Because the Taxman is coming for them too. Bet on that.

You have to help me here. We had the lowest tax rates at every tax bracket prior to allowing the tax rates to go up for the wealthy recently. That is, go BACK UP to where we were when Clinton was pres. And the economy was soaring.
So, can you show me why I should be so worried about the IRS, since I am paying less than at any time since the very early 1950's, so that I can start worrying?? Or are you just talking out of your ass???

And, since you are an apparent libertarian, let me know, if you would, where I can find that successful libertarian economy you seem to believe would result from libertarian policies. All I find is wreckage.

 

[Rshermr]

Wait a minute. Are you saying that when the Gov't takes money from us that we have less to spend and therefore the Economy slows?

Where have I heard that before?

The economy thrives when we are taxed to hell and back and unemployment is high.

Well, maybe you can help me. I can find times when unemployment is bad and tax increases have resulted in added revenue for stimulus spending, and the UE rate has decreased. But, you seem to say that the opposite is the case. Got an example????
Or, me boy, are you just posting dogma???

 

[Rshermr]

The Taxman is locked & loaded. He's gonna be very very busy in the coming years. Thanks a lot Big Government stooges.

And you proof is WHERE??? Apparently up your ass, since that is where your head is.

 

[boedicca]

Wait a minute. Are you saying that when the Gov't takes money from us that we have less to spend and therefore the Economy slows?

Where have I heard that before?

Taxes discourage behavior. When are the moonbats going to figure that out?