The impact of last year’s tax reform legislation on consumer confidence has greatly diminished in the first four months of 2019 as the personal tax deadline looms. The slight increase in average refunds is unremarkable as well as the paltry increases in average paychecks suggests the 2018 tax cuts were overwhelmingly tilted toward the corporate world and high income individuals with little or no economic stimuli to the general economy.
The new SALT (State and Local Tax) deduction limitations have been particularly painful for individual middle class taxpayers in states like California and Florida.
As a result consumer confidence has been wavering month-to-month as consumer worry about future prices for cars and homes.
According to the preliminary University of Michigan Survey of Consumers for April, released today, consumer sentiment declined 1.5% in early April, compared to March, and down 1.9% from one-year ago. Consumer view of current economic conditions nosed up 0.8% in April, compared to the prior month, but nosed down 0.6% from one-year ago. Consumer expectations decreased 3.4% in April from March and is now down 2.9% from last April.
The University of Michigan notes overall, the level of the Sentiment Index during the past 30 months was higher than any other time since 1997 to 2000, the final phase of the record 10-year expansion; a record that will be soon overtaken by the current expansion.
Meanwhile, small business optimism is shaking off the effects of the government shutdown of December and January as owners have added a record number of new employees in January and February. In fact, more than one-third of small business owners reported job openings they could not fill so far this year.
The NFIB Small Business Optimism Index improved modestly in March, increasing 0.1 points to 101. The Uncertainty Index dropped six points to 79, returning to a more normal level for recent years.
The National Retail Federation (NRF) says retail sales were down 0.7% in February seasonally adjusted from January but up 2.7 percent unadjusted year-over-year as delays and revisions related to the government shutdown continued to make comparisons difficult.
The NRF is forecasting retail sales during 2019 will increase between 3.8% and 4.4% to more than $3.8 trillion. The consumer will continue to provide direction and strength to the U.S. economy in the months ahead.