In the July and August period, several states hold sales tax holidays on back-to-school items like clothing, office supplies, and personal electronics. Although state governments aren’t fond of losing tax revenues, businesses like to take the opportunity to boost sales while consumers can maximize their dollars. Although the tax holidays are mostly intended for households with children in school, households and home offices also take advantage of the chance to maximize their buying power.
The bulk of the sales tax holidays fall late in July and the first weekend of August. These should support retail spending at a time when consumers are exercising caution in their buying. There may not be evidence of a boost to consumer spending in the July and August reports on retail and food services sales (Friday, August 15 at 8:30 ET and Tuesday, September 16 at 8:30 ET, respectively). However, if the tax holiday is tempting to consumers, it could save personal consumption expenditures in third quarter GDP from looking weak, although that won’t be known until the advance estimate is released at 8:30 ET on Thursday, October 30.
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