‘Tis the US tax-refund season

For many households, tax refunds represent the biggest cash-flow event of the year. It’s early, but we think this will be a favorable tax-refund season for filers.

What you will learn:

• Last year, annual tax-code adjustments were more generous than usual as wage growth slowed. This raised the risk of more households overwithholding their taxes and being owed a refund upon filing this year.
• Historically, February is the most important month for refunds. A larger refund issuance relative to prior years correlates with stronger retail sales during that month.
• The boost to February retail sales is even larger for certain categories such as general merchandise stores and used-car dealerships. This speaks to the tendency of low- to moderate-income households to file early.
• Of all categories, used-car sales appear the most responsive to swings in refund issuance, and the impact of the refund season is visible in the seasonal pattern of wholesale used-vehicle prices.

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