There were high hopes that Americans would run out and spend their tax rebate checks in a hurry, and that this would be just what the economy needed to get back on track. Well, it does seem that the checks were spent, but as weaker than expected June retail figures come in, it seems that it was a weak fix to a much bigger problem.The program worked out pretty well in May, as retail sales grew 0.8% during the month, but we were sent back to reality today as June's figures showed that retails sales in the month grew at a measly 0.1%. This was lower than the 0.4% that Wall Street analysts were expecting. Since these figures typically get re-adjusted, it is not out of the question to assume that this figure could be even lower. May, for example, was originally reported to have had an increase of 1.0%, but that was lowered to 0.8%.
Once again, we have to assume that it is record high gasoline prices that are weighing on consumer's minds, as the biggest declines came in automobiles, furniture, electronics and building materials. Auto sales of course were the biggest drag on the retail numbers, and if you look at the figures while ignoring auto sales, then retail would have actually risen by 0.8%, but that is still under the 1.0% that analysts were predicting.
In June, auto sales drop by 3.3%, which was the biggest monthly drop since February of 2006. Furniture was down 1.4%, and electronics sales dipped 0.6%, both of which were the biggest drops either industry has seen so far this year.
So, while companies were able to see a short spurt in spending following the mailing of the rebate checks this year, that is all but over, and now we are back to where we were three months ago -- consumers worrying about filling up their tanks, and cutting back on expenses wherever and whenever possible.
Do not be surprised to see this trend continue for the foreseeable future. Oil prices continue to remain near record highs, and gasoline prices have not shown any signs of relenting. With gasoline selling above $4 in most of the country, it is anyone's guess as to when things will finally turn around.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
7-24-2008 @ 2:05PM
freegasatlast2aol.com said...
I invested my rebate check in a new business that pays in gas and cash for referals and I have already made some of my investment back, I don't pay for gas anymore and I drive an expedition (gas guzzler). So, my check did not hit the stores, but, the extra money was put to good use I don't think I would have used my limited household money for this, but now I am very happy I got involved.
http://www.freegasatlast.com/2gasup