Stimulus effective in lifting spending: study

By Nancy Waitz

WASHINGTON (Reuters) - Tight-fisted consumers wary of anemic economic growth opened their wallets between May and July and spent their economic stimulus checks, a recent study has found.

"Our findings underscore the potency of the economic stimulus payments in stabilizing consumer spending during recessions," said authors Christian Broda of the University of Chicago and Jonathan Parker of Northwestern University.

The typical family increased their spending on food, mass-merchandise and drug products by 3.5 percent when their government stimulus checks arrived, the study found.

The extra spending implies the average recipient spent about 20 percent of their stimulus checks on non-durable goods -- goods such as paper products and food items that are used up quickly, the authors wrote.

According to the study, the overall nondurable consumption in the second quarter has been boosted by 2.4 percent directly due to the stimulus payments, and will be held up by about 4.1 percent in the third quarter.

The government releases its first accounting of second- quarter economic growth on Thursday and economists expect it will show a sharp pickup.

Earlier this year, the Democratic-led Congress and the Republican Bush administration forged bipartisan cooperation to hammer out a package that includes billions of dollars in one-time rebates to taxpayers.

In February, President Bush signed the $168 billion, two-year economic stimulus package into law to stave off an election-year recession.