Consumers to spend rebate checks on necessities

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, conducted by BIGresearch.

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. 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. 4.0 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).

The survey reinforced February estimates on how consumers would spend the $105.7 billion being distributed in tax rebate checks. 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.)

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.

| See the chart here |

RBR/TVBR observation: Look at the chart where consumers are going to start spending this money. If they are going to start savings, you want to hit some banks for ad dollars. If they are going to buy necessity items, they are broken down by retail category.