Retail Sales Forecast: Big Boost from Tax Rebates

Federal tax rebates will give retail sales a significant and much-needed boost in the next two quarters, predicts TNS Retail Forward, saying retails sales growth will improve by as much as three percentage points in the third quarter and half that in the second quarter, MarketingCharts writes.

Households will spend as much as $42 billion of the $105.7 billion tax rebate total at retail stores from May through the end of the year - with most of the incremental retail spending in the third quarter - TNS Retail Forward estimates.

Year-to-year growth for the second quarter is forecast at 3.5 percent with the tax rebates instead of 2.0 percent without the rebate impact. Third quarter growth is forecast at 6.0 percent instead of 3.0 percent without the tax rebate impact.

The sales forecast is of retail sales excluding autos and gasoline as reported by the U.S. Department of Commerce.

A combined 41 percent of TNS Retail Forward ShopperScape survey respondents confirmed they intend to use their rebate check for either everyday living expenses or special purchases.

How much and where U.S. shoppers spend their rebate checks in the coming months will vary by income segment, the research found (see table):

• Down-market to mid-market shoppers, who are most likely to receive and spend a tax rebate, will remain focused on value and everyday purchases.
• Mid-to-up-market households will be more inclined to make big ticket purchases, which will likely benefit sales of consumer electronics and some home furnishings.
• Homegoods sector sales will likely remain weak, while discount department stores, supercenters, warehouse clubs and other value-focused retailers will fare best.
• The outlook will be mixed for softgoods retailers, with some improving while others languish.

“Retailers and suppliers should maximize their efforts to benefit from the tax rebates because growth prospects otherwise look bleak through the end of the year,” said Frank Badillo, senior economist at TNS Retail Forward.

“While the impact of the tax rebates is significant, it is unlikely that these rebates will lead to a sustained economic rebound,” he concluded.

“Growth remains threatened by lingering fallout from the credit crunch, which is dampening investment and raising job insecurity. Also weighing heavily on growth is persisting inflation - largely in food and fuel - that is taking a toll worldwide and complicating efforts by central bankers to reignite growth,” Badillo said.

About the data: The TNS Retail Forward ShopperScape survey is conducted monthly with a sample of 4,000 US primary household shoppers. The survey is conducted online among a nationally representative sample of households.