Monday, May 19, 2008

According to the findings of a National Retail Federation survey, conducted by BIGresearch, consumers still plan to spend about forty percent of their tax rebate checks, sending $42 billion back into the economy, but because of the increasing prices of gas and groceries, consumers plan to spend more of their rebate checks on necessities like gas and food rather than on discretionary items like electronics and apparel.

17.2 million people plan to use some of their tax rebate check to pay for gasoline, up from 12.1 million people who planned to do so in February. The rising cost of everyday items like milk, bread and rice also means that more consumers plan to spend the checks on groceries, with 21.2 million people using a portion of the check for food, up from 20.4 million people in February.

 Fewer people plan to spend rebate checks to buy furniture (2.7 million vs. 4.0 million in February), purchase a vehicle (2.4 million vs. 3.2 million in February), or use it for "me" time at a salon or spa (2.9 million vs. 3.5 million in February).

 NRF President and CEO Tracy Mullin, says "The rising cost of groceries and gasoline means that discretionary spending is taking a backseat to necessities... economic stimulus checks could not (have) come at a better time."

 According to the findings, consumers as a whole plan to spend 39.9 percent of their tax rebate checks, providing a $42.2 billion boost to the economy. Consumers will also use the money to:

• Pay down debt ($28.1 billion),
• Save ($20.1 billion),
• Invest ($3.4 billion) and
• Pay medical bills ($4.9 billion)
• Spend in "other" ways ($6.9 billion

Phil Rist, Vice President of Strategy for BIGresearch, says "...Some retailers are helping customers stretch the value of their rebate check further by tacking on an additional ten percent to gift cards purchased or holding special in-store promotions."

 According to the survey, women are more likely to spend and/or save portions of their rebate check, while men are more likely to pay down debt. Young adults 18-24 will spend more of their checks (43.5%) than any other age group.

 Concurrently, a recently released TNS Retail Forward study predicts that retail sales growth will improve by as much as 3 percentage points in the third quarter and half that in the second quarter as a result of Federal tax rebates. The TNS study, though, says that  how much and where U.S. shoppers spend in the coming months will vary by income segment. Down-market to mid-market shoppers, who are most likely to receive and spend a tax rebate, will remain focused on value and everyday purchases.  Mid-to-up-market households will be more inclined to make big ticket purchases, which will likely benefit sales of consumer electronics and some home furnishings, says the report.