The tax rebate checks won’t give a serious boost to retailers, at least not one that isn’t already in the stocks (know any investors who aren’t aware that the checks are in the mail?). We’ve discussed this problem before, but it’s important to crystallize the issue:
1) Most of the rebate checks will likely go to paying down debt–mortgages, credit cards, auto loans, you name it. Rational consumer is going to pay off as much of their debt as possible before they take that trip to the mall. And, unfortunately, there is a lot of debt to be paid off.
2) Credit card debt is ballooning and increased again last month. As consumers continue to struggle with high gas and food prices, many of these rebate checks may have already been spent. The strong, though misleading, same-store sales numbers from last month may have already incorporated a significant percentage of the anticipated stimulus.
3) Soaring gas prices will eat a nice chunk of the checks. US demand may finally be waning with sky-rocketing oil prices, but with oil hitting new records every day, people might just be happy just to pay their utility bill and fill up their gas tanks with any extra money. Soaring food prices wil further mute the impact of the rebate too.
4) A survey from May 2nd, 2008 showed that only 30% of people actually plan on spending their tax rebate. It is actually encouraging that consumers are planning on bolstering their own balance sheets rather than a retailers, as a little pain now could prevent severe pain later. But this won’t help consumer spending.
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