Stimulus Payments & Consumer Spending

The first round of tax stimulus checks have made their way to some Americans. The question is will Americans spend these checks and if they do what will they buy.

Consumer Spending

The Fed released consumer spending numbers that showed a marginal growth in consumer spending. The report showed a 0.4 percent increase in March, if inflation is taken into account the increase was more like 0.1%. From a NY Times article:

'Most of the money that was spent went toward services, including necessities like haircuts and medical care. Sales of big-ticket items like washing machines and television sets declined in March, the report said, a signal that Americans were putting off large-scale purchases, which are commonly bought on credit. In the first quarter, sales of those goods plummeted 6.1 percent.'

The report also showed that the average Americans income rose just 0.3 percent, barely keeping up with the monthly inflation rate and taxes. This was a drop from the 0.5% increase the month before.

Stimulus Checks

Congress passed the economic stimulus plan earlier this year. The plan was meant to boost the ailing US economy by prodding Americans to spend. (This type of economic 'stimulus' has been a favorite of the Administration and of Congress. They seem to think that we can spend our way out of any economic problem.)

If anything the boost will be short lived, and may not provide that much stimulation to the economy. A report issued by Parks Associates, indicates that 42% of the people they polled plan on saving their money due to the uncertainty with the economy.

Where Will The Checks Go

CNN.com has a series of articles on what 'ordinary' Americans plan to do with the stimulus checks.

Better yet, I like this journalists ideas:

• Put your money where your mouth is by donating your entire check to your favorite presidential candidate, or even your favorite local politician's war chest. So, John Q. Patriot, do you really support Barack, Hillary or McCain? Prove it.
• Guarantee a fine dining experience at your favorite eatery each month by paying up front and asking for a discount on drinks. Just think, $1,200 will get you and your wife into that swanky joint once a month for a year simply by saying, "Put it on my tab."
• Buy that new bicycle or mo-ped you'll soon need for local errands when gas prices get truly ridiculous.
• (H)ost your very own Economic Stimulus Act Block Party in your neighborhood and invite only those poor souls who didn't get a check from Uncle Sam.

Source:
'For a 4th Month, Shoppers Curtail the Desire to Spend', by Michael M Grynbaum, NY Times
'Consumers Saving Rebate Checks', by Laura Palotie, Inc.com
'Rebate checks: How to spend '' CNN.com
'Stimulating Ideas On How To Spend a Stimulus Check', by Jerry Davich, Post-Tribune