"Results are better than they would have been if Congress had not enacted the tax rebates," an executive from the National Retail Federation told a congressional hearing. "But consumer spending remains subdued because of the stresses of declining home values, escalating fuel and food costs, increasing unemployment and weak financial markets. We believe that a compelling case can be made for providing additional economic stimulus legislation."
Citing June polling data, the NRF says consumers who had received their rebate checks had spent 42.9%, "but that nearly half of the money spent had gone to gasoline (9.7%) or necessities such as groceries (10.4%)." Clothing and apparel, the next-largest category, got a scant 3.3%. Consumers said 25.2% of the money went to pay off debt and 17.1% went into savings. A separate NRF poll found that 20% of consumers had set aside some of their rebate money for back-to-school shopping.
Of course, what consumers say they plan to do and then actually follow through on can be quite different. A newer survey from Precima, a retail analytics firm, conducted after almost all the checks were mailed, finds that 84% of consumers say they did not use the check they received from the federal government to purchase groceries.
Nor does it appear that many used it to pay down debt. Checks started going out in May, and when the Federal Reserve released those numbers recently, consumers had actually boosted their borrowing in May at an annual rate of 3.6%, mostly reflecting heavy credit-card use.