Why Everybody's Nervous About The Upcoming Retail Sales Report

This particular report, however, will be more scrutinized than usual. And it is expected to have big implications on economists' forecasts for the economy.

Why?

This is the first month where U.S. workers got hit with the recent payroll tax hike.

Economists are looking for a modest increase in sales. But many have noted that it's unclear how much the tax hike affected consumer sentiment.

Citi's Steven Englander has declared it 'The Most Important Datapoint So Far This Year.' His commentary:

The big question for the US economy is how much of a headwind the January 1 tax hike has become for US activity. January retail sales would by far be affected more directly than January payrolls or ISMs, so retail sales will be the first really hard data on the impact of the tax hike. Expectations are relatively muted. The consensus is for headline and ex-autos at +0.1% m/m (Citi economists expect +0.2% and +0.3%, on the view that momentum will persist. Core retail sales are expected to growth 0.3% m/m by the consensus and 0.4% by Citi economists.

And the tax hike isn't the only fiscal issue on consumers' minds. BofA/ML strategist David Woo described this current period to us as a "moment of truth" for the economy, and anticipated the fight over the sequester (which takes place over the coming weeks) will be where it all happens.

Follow the release live at BusinessInsider.com.