Posted on 06/14/2008 5:37:36 AM PDT by BloodOrFreedom
The $48 billion in tax rebates sent out to American consumers this spring has helped keep the US economy out of a recession, but analysts believe the impact may only be temporary.
The rebates, approved by Congress earlier this year, helped push May retail sales up at twice the expected rate. But consumers are still facing rising gas costs, falling home prices and the struggling job market, so the rise is probably short-term, says Mark Zandi, chief economist for Moody's Economy.com.
"Come October, there are probably going to be weaker numbers," Zandi said. "People are spending the rebate checks very quickly, so the stimulus is going to fade very quickly."
Some recipients reportedly spent their money back in April, before they even received the checks, Zandi said. Only 29 percent of shoppers saved their checks, while 41 percent of households used them to pay off credit cards or mortgage debts, according to TNS Retail Forward.
About 28 percent of consumers reportedly used their rebates for everyday expenses like gas and groceries, while only 14 percent used them for special purchases, such as jewelry, according to the research and consulting firm.
Supermarkets, discount chains, consumer electronics stores and online retailers have benefited the most from rebates, with discounters such as Wal-Mart
and Target posting their largest sales increases in 14 months.
Still, shoppers are still in a "belt-tightening mode," and the retail trend significantly weakens when the checks are taken out of the mix, says Frank Badillo, senior economist for Retail Forward.
"From what shoppers are telling us, they are looking to cut back their spending pretty much across the board," he says. "The stimulus checks are hiding that."
Badillo predicts the rebate checks will further extend the economy's growth rate into the third quarter but will tail off in the fourth, he said.
Bill Seidman, a consultant for RBW Capital Management and CNBC contributer, disagrees, saying the checks will provide a more permanent boost to the economy.
"The consumer seems to be hanging in there despite oil and gas prices, despite all the uncertainties in the job market," he says. "What it says is we don’t have a recession and aren’t going to have one."
From the article:
"The rebates, approved by Congress earlier this year, helped push May retail sales up at twice the expected rate. But consumers are still facing rising gas costs, falling home prices and the struggling job market"
So how is this not indicative of a recession?
The official definition of recession is when GDP growth is negative for two consecutive quarters or more. We have yet to have one quarter of negative growth.
Did all the checks go out already?
I haven’t gotten crap in the mail.
Most people who had them mailed out to direct bank deposit accounts received them already. The paper checks take longer.
Leni
Its a good thing those government checks in May kept the economy growing in January, February, and March!
Well, if the stimulus checks worked so well and I haven’t heard anyone complain of government programs being cut, children starving, etc. because of these stimulus checks, then I vote the government sends us even more of our own money back so we can do our part in keeping the economy going.
So... if letting us have tax money stimulates the economy, why not just cut our taxes?
Never mind... that is common sense (which Washington is lacking) and would be counter-active to income redistribution..... Why should WE keep our own money when there are other people who didn’t earn it who want it?
It's only fair that everybody gets theirs, even those who do not merit it. /s/
I’d do my part to keep the recession at bay with MY stimulus package, if we ever GOT the darn thing.
Thanks
Neither have I.
Leni
Some people call that whistling by the grave yard, I picked up a copy of the Washington times this past week, it had three pages of foreclosures, most in the $300,000 range.
Mine is in the market (what there was of it!). It really ticked me off that I got shorted while those who paid zero taxes got a full measure.
Be afraid, very afraid!
Leni
Hello, to you, BTW.
I remember something about if someone uses TorboTax (Or something similar) to do their taxes, their DD checks will be delayed. But it’s been almost a month since I was SUPPOSED to get a check.
Oh, well. It won’t kill my wallet to not get it.
“Torbotax?!”
Someone please shoot me now....
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