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It might have been good news for grocers and gas stations, but the fact that most stimulus check money is being siphoned away by higher food and fuel prices has mitigated the overall intended positive effects on discretionary spending, said a National Retail Federation representative in testimony before a Congressional committee yesterday.
Consumer spending would still benefit from additional stimulus measures, the NRF official told the House Small Business Committee during a hearing on "Economic Stimulus for Small Business: A Look Back and Assessing Need for Additional Relief."
"Consumer spending remains subdued because of the stresses of declining home values, escalating fuel and food costs, increasing unemployment, and weak financial markets," said Rachelle Bernstein NRF's v.p. and tax counsel. "Consumers are concentrating their spending on the essentials, are more concerned than ever with pricing, and are shopping more online so they can more easily make price comparisons and save money on gas."
Bernstein said a "compelling case" could be made for providing additional economic stimulus legislation. "If Congress does act on a second economic stimulus package, we believe it should once again include relief for the consumer. Since consumer spending is the largest contributor to GDP, it is difficult to foresee an improvement in overall economic growth until consumer spending improves."
Bernstein cited polling conducted June 3-10 that found consumers who had received their rebate checks had spent 42.9 percent of the money, but that nearly half of the money spent had gone to gasoline or necessities such as groceries. The total of those two categories exceeded all other spending categories combined, with the next-largest category being clothing and apparel.
Consumers said 25.2 percent of the money went to pay off debt, and 17.1 percent went into savings.
At the time the survey was conducted, 45.3 percent of taxpayers had received their rebates, which range up to $600 per individual making up to $75,000 a year and $1,200 for couples making up to $150,000, plus $300 per child for families.
Rebate payments started going out the last week of April, and sales of general retail merchandise (excluding automobiles, gas stations, and restaurants) showed a month-to-month increase of 0.6 percent in April and 0.9 percent for May. But June's numbers were up only 0.2 percent after consumers said they were shifting plans for their rebate money from discretionary items to necessities.
Another poll conducted for NRF by BIGresearch this month found that 20 percent of consumers had set aside some of their rebate money to spend on back to school supplies, suggesting that money that was saved might still be spent on consumer merchandise later in the year.
The NRF's membership comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores, and grocery stores as well as suppliers of retail goods and services. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations.
The poll was conducted by BIGresearch, an Ohio-based firm that conducts regular consumer surveys for NRF.