Rebate Checks to be Spent on Necessities

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Consumers still plan to spend about forty percent of their tax rebate checks, sending $42 billion back into the economy, but what they plan to buy has shifted slightly from February, according to the findings of a National Retail Federation survey.


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, according to the survey conducted by BIGresearch. Due to the rising cost of fuel, the largest leap in rebate spending will come at the pump, as 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.


As a result, fewer people plan to spend rebate checks to buy furniture (2.7 million vs. 4 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).


“The rising cost of groceries and gasoline means that discretionary spending is taking a backseat to necessities,” said Tracy Mullin, NRF president and chief executive officer. “For many consumers, struggling with rising bills and lowering home values, economic stimulus checks could not come at a better time.”


The survey reinforced February estimates on how consumers would spend the $105.7 billion being distributed in tax rebate checks, NRF said. 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). (Consumers said they will also use $6.9 billion in “other” ways.)


In February, President Bush signed H.R. 5140, the Recovery Rebates and Economic Stimulus for the American People Act of 2008. The $152 billion measure provides tax rebate checks of up to $600 per working individual and $1,200 per married couple, plus $300 per child for families with children and new tax incentives for job-creating business investments.


“Many retailers have already announced creative promotions to give consumers an extra incentive to shop with them,” said Phil Rist, vice president of Strategy for BIGresearch. “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 percent) than any other age group.

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