stimulus

The Stealth Stimulus That Could Tip Consumer Spending

Source: http://www.businessinsider.com/citi-tax-refunds-2012-6

Bulls on the economy are constantly looking for any reason to be optimistic on the U.S. economy.

Personal consumption accounts for around 70 percent of GDP, so any help to the consumer would be welcome.

“There are many reasons to be skeptical of forecasts for a significant overall reacceleration in consumer spending in 2H,” writes Citi economist Steve Wieting.  “But there are some bright spots.”

Wieting dug up a nugget that could provide a little stimulus: tax refunds.  From his note to clients:

As Figure 12 shows, gross tax refunds have increased relative to disposable income in recent years. Tax refunds are a seasonal phenomenon, and ordinarily don’t deserve much attention. But as they have increased in amplitude, their impact may be more notable. Payments within the first quarter were particularly large and early. For the consumers relying on such payments, savings rates are low, and consumption is closely and immediately tied to cash flows.

tax refund chart

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Friday, June 29th, 2012 news No Comments

Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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