The “fiscal cliff” drama that closed 2012 resulted in a last-minute deal that included, among other things, the expiration of a a payroll tax cut.However, Washington’s fiscal brinksmanship also forced the IRS to delay the beginning of the tax filing season by two weeks. As a result, Americans got their tax refunds on a lag.
Indeed, some Wal-Mart executives thought they had a revenue disaster on their hands until they realised what was going on with the tax refunds.
The good news is that those tax refunds are coming, and they’re coming quickly.
From UBS’s Kevin Cummins:
Another favourable development is that consumers are now (finally) benefiting from an increasing pace of tax refunds. So far in 2013, total year-to-date refunds are running a cumulative $141 bil (through Mar 8) versus $159 bil through Mar 8 a year ago (-11% y/y). However, the difference stems from a delayed filing season this year. The IRS officially began the filing season on January 30 this year versus January 17 last year due to the changes in tax code as part of the fiscal cliff deal. Thus, there have been about 10 fewer days of refunds issued this tax season versus in 2012. However, the IRS has more than made up the initially sluggish pace of refunds issued. For the first 28 days of this year’s filing season (thru Mar 8) versus the 28 first days of last year’s season (thru Feb 23), refunds are running a cumulative $140 bil versus $109 bil last year. While that comparison is not perfect either, the daily pace of refunds has recently picked up noticeably. Importantly, what appears to have been a headwind for the consumer in late-Jan/early-Feb has now turned into a tailwind as refunds have picked up.
On Wednesday at 8:30 AM, we’ll get the February U.S. retail sales number. This tax refund is likely to cause some noise in the report.
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