NEW YORK (Reuters) - Most U.S. consumers are likely to save the Bush administration’s tax rebate or use it to pay down debt in anticipation of a slowing economy, according to a Reuters/University of Michigan survey published on Friday.
Seventy percent of the consumers polled plan to take a “precautionary” approach, saying they would use the rebate to bolster their personal balance sheets. Among those, 25 percent favored using the money to rebuild savings, while 45 percent plan to repay debt, the survey showed.
Only 30 percent of consumers plan to spend the tax rebate in 2008, according to the survey.
“The record increase in economic uncertainty that has been expressed by consumers is a compelling reason for them to adopt more cautious spending plans,” the survey said.
President George W. Bush signed into law a $152 billion fiscal stimulus package earlier this year that will provide tax rebates to 130 million Americans, with the size of most payments about $600 for an individual and $1,200 for a couple.
However, even if most rebates are not spent, the program may well prevent what would have otherwise been additional declines in consumer spending, the survey showed.
Overall, out of the total of $107 billion that households have begun to receive, some $35 to $40 billion can be expected to be spent by the end of the third quarter.
Higher-income, older consumers, and those who reported recent gains in their finances were slightly more likely to plan to spend the tax rebate, according to the survey. Lower-income, younger consumers and those who reported a worsened economic situation were more likely to intend to use the money to repay debt.
Asked if they thought the rebate would improve or worsen overall economic prospects, two-thirds of all consumers said it would not have a significant impact, the survey showed.
Reporting by Vivianne Rodrigues; Editing by Jonathan Oatis