The National Retail Federation told a congressional hearing Thursday that rebate checks intended to stimulate the economy have helped significantly, but that much of the money has been diverted by high gasoline and grocery prices, and consumer spending would still benefit from additional stimulus measures.
“Results are better than they would have been if Congress had not enacted the tax rebates,” said NRF vice president and tax counsel. “Tax rebate checks are providing some stimulus, but consumer spending remains subdued because of the stresses of declining home values, escalating fuel and food costs, increasing unemployment, and weak financial markets. Consumers are concentrating their spending on the essentials, are more concerned than ever with pricing, and are shopping more on line so they can more easily make price comparisons and save money on gas.”
While sales of electronics, appliances and clothing have increased since the rebates started going out, soaring prices for gasoline and groceries that were not anticipated at the beginning of the year mean consumers have used more of their rebate money on essentials rather than consumer goods that would have had a broader impact on the economy.
“Based on the economic information that is available, we believe that a compelling case can be made for providing additional economic stimulus legislation,” Bernstein said. “If Congress does act on a second economic stimulus package, we believe it should once again include relief for the consumer. Since consumer spending is the largest contributor to GDP, it is difficult to foresee an improvement in overall economic growth until consumer spending improves.”
Bernstein’s comments came in testimony before the House Small Business Committee during a hearing held today on “Economic Stimulus for Small Business: A Look Back and Assessing Need for Additional Relief.”
Bernstein cited polling conducted June 3-10 that found consumers who had received their rebate checks had spent 42.9 percent of the money, but that nearly half of the money spent had gone to gasoline (9.7 percent) or necessities such as groceries (10.4 percent). The total of those two categories exceeded all other spending categories combined, with the next-largest category – clothing and apparel – amounting to only 3.3 percent. Consumers said 25.2 percent of the money went to pay off debt and 17.1 percent went into savings. The polling was conducted by BIGresearch, an Ohio-based firm that conducts regular consumer surveys for NRF.
At the time the survey was conducted, 45.3 percent of taxpayers had received their rebates, which range up to $600 per individual making up to $75,000 a year and $1,200 for couples making up to $150,000, plus $300 per child for families.