Americans Rein-in Spend Despite Tax Incentives

15 August 2008

WASHINGTON DC: The US government appears to have had short-lived success in its attempts to fan the cooling embers of the nation's once-hot economy.

Latest official retail sales figures reveal tax rebates granted to the nation's hard-pressed citizens earlier this year have failed to maintain any upward spending momentum.

Sales slipped 0.1% in July, the first decrease in five months, and a sign that consumers are unable to offset the increasing cost of  food and fuel against the Bush administration's incentives.

Total retail and food-service sales fell to $384.6 billion (€258bn; £205.6bn) in July from $385.2bn the previous month.

Auto and autoparts sales in July slid 2.4% from June and 10.5% from July 2007. Sales of furniture and building material, hit by the housing slump, also fell from a year ago.

In addition, the nation's leading department stores revealed weaker consumer spending during the second quarter, with Macy's reporting same-store sales down by 2.1%.

US import prices increased 0.9% in July, up 8% from a year earlier; while the price of petroleum imports jumped 4% in July, an eye-watering 79.2% year-on-year rise.

Despite hopes that oil prices have peaked – at least for now - Naroff Economic Advisors' Noel Naroff warned: "Broad-based increases in import prices make it clear that the pressures on consumers will not go away with the fall in gasoline costs."

Data sourced from Wall Street Journal Online; additional content by WARC staff