Are Those Rebate Checks Helping?

Buffalo Bills season tickets, Obama campaign donations, cannabis indica, a "mom" tattoo, lottery tickets, two leather-bound bibles, Terminator collectibles, wedding expenses, and a divorce attorney -- all purchases people have posted on the website HowISpentMyStimulus.com, exposing what Rudy Adler calls the "idiosyncratic spending habits of the American public."

"My goal was just to capture the stories," explains Adler, a 26-year-old writer/designer based in Brooklyn, who launched the site in early May, around the time direct-deposit filers began receiving their tax rebates. "There was a lot of speculation on where the money was going, and I wanted to devise a method for people to report what they're buying."

As part of the economic stimulus package approved by President Bush in February, the government is handing out $105.7 billion in rebate checks -- up to $600 per working individual and $1,200 per married couple, plus $300 per child. As of Friday, almost half the checks had been sent out, pumping taxpayers with nearly $57 billion in added spending power. But it remains to be seen whether this cash flow will trigger an uptick in consumption or just help struggling households break even.

Retailers, of course, hoped the checks would encourage more discretionary spending, but the current economic climate is not geared toward shopping binges. The statistics are bleak across the board. The cost of food has shot up nearly 6 percent since last year; oil is reaching for the sky, causing a rise in energy costs and making gas so expensive that SUV and truck sales are sputtering; the housing market continues to slump under the weight of the subprime mess (first-quarter home prices dropped 14 percent); and May saw the largest one-month surge in unemployment since 1985. To quote John Mellencamp, "It's hard times for an honest man."

During a downturn, every little bit could help. While a survey by the National Retail Federation shows that 40 percent of people are planning to spend their rebates, most are plotting a practical strategy, skipping Wii splurges in favor of necessities.

"In February, 5 percent of consumers said they would purchase gas with their rebate checks," says NRF spokesperson Kathy Grannis. "In May that increased to 7.6 percent of consumers. The difference between February and May affirmed what the rest of the world knows: that consumers are struggling with basics like gas and food."

With the cost of groceries on the rise, 21.2 million respondents to the survey plan to devote a chunk of the check to food (up from 20.2 million in February). Consumers also plan to spend $28.1 billion to pay down debt and $4.9 million on medical bills. Not exactly fun stuff.

It's also instructive to see what people are not planning to use the money for. According to the NRF, only 2.7 million people plan to purchase furniture (down from 4 million in February) and 2.9 million intend to use part of the money for spa or salon services (versus 3.5 million in February). "Not surprisingly, many people plan on saving the money," says Grannis. "At the end of the year, maybe they will pay off a bunch of bills."

As a result, department stores and apparel chains have not gotten a perceptible sales boost. When asked if she has seen any bump in business over the past month, Lauren Staller, manager of the Something Else clothing stores in Brooklyn, is less than enthused. "No, not really. It's been about the same." For many clothing companies, sales have actually dropped. Limited Brands reported that its same-store sales fell 6 percent in May, American Eagle Outfitters Inc. said sales were down 9 percent from a year ago, and Gap's totals fell 14 percent.

There is a bright spot in this dreary panorama. One retail sector, wholesale, is showing real signs of stimulation, with the clearest beneficiary so far being Wal-Mart and its Sam's Club stores. Wal-Mart Stores Inc. announced last Thursday that same-store sales rose 4.4 percent in May, and it's no coincidence that the megaretailer has cashed $350 million in rebate checks. News of Wal-Mart's strong performance prompted the biggest single-day market gains in months. (Of course, the Dow then took a nosedive on Friday when oil went up $11 per barrel.) Other wholesalers also posted better-than-expected May numbers, especially when fuel sales are factored in, with Costco reporting a 9 percent increase in same-store sales.

The anecdotal evidence on HowISpentMyStimulus.com suggests a similar trend toward pragmatism. Many respondents detail spending on mundane home repairs, medical expenses, property taxes, and past-due credit cards.