2008 American Consumer Preview Part 10

Note: This is the last 2008 American Consumer Preview. For the first 9, click here.

Money's coming!

Is it coming your way?

With the announcement that the tax checks were arriving in folks bank accounts this week, I hope you planned a convincing campaign to get people to spend the money with you!

Here's where the money is going:

Rebate Checks Should Jump-Start Retail Sales

Federal tax rebates will give retail sales a significant and much needed boost in the next two quarters, according to a report by TNS Retail Forward.

TNS Retail Forward estimates that households will spend as much as $42 billion -- of the $105.7 billion tax rebate total -- at retail stores from May through the end of the year, with most of the incremental retail spending occurring in the third quarter.

Year-to-year growth for the second quarter is forecast at 3.5 percent with the tax rebates, instead of 2.0 percent without the rebate impact. Third quarter growth is forecast at 6.0 percent instead of 3.0 percent without the tax rebate impact. The sales forecast is for retail sales excluding autos and gasoline as reported by the U.S. Department of Commerce.

"Retailers and suppliers should maximize their efforts to benefit from the tax rebates because growth prospects otherwise look bleak through the end of the year," commented Frank Badillo, Senior Economist at TNS Retail Forward. "Growth remains threatened by lingering fallout from the credit crunch, which is dampening investment and raising job insecurity. Also weighing heavily on growth is persisting inflation -- largely in food and fuel -- that is taking a toll worldwide and complicating efforts by central bankers to reignite growth," he added.

How much and where U.S. shoppers spend in the coming months will vary by income segment. TNS Retail Forward ShopperScape research indicates that 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. TNS Retail Forward expects homegoods sector sales will likely remain weak while discount department stores, supercenters, warehouse clubs and other value-focused retailers will fare best. The outlook will be mixed for softgoods retailers, with some improving while others languish.

According to the ShopperScape survey, how tax rebates will be spent (more than one answer possible): Pay credit card or other bills, 32 percent; put it into savings, 30 percent; use it for everyday expenses (e.g., groceries, gasoline, etc.), 23 percent; use it for a special purchase (e.g., vacation, jewelry, or big-ticket consumer electronics items such as a computer or HDTV), 19 percent; pay down mortgage debt, 4 percent; make charitable donations, 3 percent; other, 7 percent; do not expect to get a rebate check, 9 percent.

"While the impact of the tax rebates is significant, it is unlikely that these rebates will lead to a sustained economic rebound," Badillo added.

(Source: TNS Retail Forward, 04/28/08)

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