Discretionary Item Stores, Housing-Related Retailers Not Likely to Benefit from U.S. Tax Rebates

Washington, D.C.–U.S. retailers are hoping the economic stimulus plan’s tax rebates will give sluggish consumer spending a $42.9 billion boost, the Financial Times reported Tuesday.Americans plan to spend 40 percent of their rebate money, which will arrive in May, according to a survey by the Washington, D.C.-based National Retail Federation. About $30 billion will go toward paying debt and $19.8 billion will go into savings.However, the impact the rebates will have on consumer spending has been questioned. Retailers are waiting to see if consumers will spend their 40 percent portion on basic needs such as food–which Wal-Mart found last month customers were using Christmas gift cards to buy–or on electronics, toys and other discretionary purchases.Roughly 25 percent of the rebates issued in 2001 were spent at Wal-Mart, according to Citigroup, indicating large discount stores stand to profit from this round of rebates. However, retailers who sell discretionary items and retailers who sell goods linked to the housing market–such as Home Depot–may not see an influx of shoppers. In addition, the University of Michigan found that less than 30 percent of the 2001 rebates were spent–consumers either saved the cash or paid off debt with it, the Times said.