Retailers are bracing for a surge in spending unlike anything we've seen in 17 years

  • US companies are celebrating tax cuts by offering employees bonuses and wage increases.
  • These unexpected bonuses will be spent on non-essential products, according to a Barclays note.
  • The retail sector is likely to be one of the main beneficiaries of this.

US companies are putting more money in employee’s pockets thanks to corporate tax cuts, and it’s likely to boost the retail sector, Barclays says.

In a note to investors, Barclays highlighted the benefits of the GOP’s recent corporate tax cuts, which has encouraged companies to hand out bonuses to employees.

The note likens the effects of the new tax legislation to that of the Economic Growth and Tax Relief Reconciliation Act under President George W. Bush in 2001, which was followed by a surge in consumer spending.

A range of companies have already announced plans to increase employees’ wages or give them special bonuses.

This week, Southwest and American Airlines announced they will give $US1,000 bonuses to employees, following the news. AT&T and Bank of America have also said they would give $US1,000 to thousands of their employees.

Barclays is expecting these bonuses to be spent on discretionary products and in particular, big-ticket items. This is likely to give a welcome boost to the retail market.

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