Retailers waiting for the annual burst in spending that typically starts around now may find themselves a little disappointed in 2018. According to the National Retail Federation, more Americans than ever plan to hold onto their tax returns this year to either pad savings or pay down debt. That’s according to the association’s annual tax refund survey, conducted by NRF and Prosper Insights & Analytics.
“Tax return season is a time when consumers plan and prioritize financially, whether it is paying down debt or saving for a rainy day,” NRF President and CEO Matthew Shay said in a statement. “With the passage of tax reform and the expectation of more disposable income, we expect to see consumers prioritizing how and when they spend their hard earned dollars, especially during the back-to-school and holiday seasons.”
Of the 65 percent of taxpayers who said they expect a refund this year, 49 percent said they would put it into savings, up from 48 percent last year and the highest level in the 12-year history of the survey. Additionally, 35 percent said they’d use it to pay down debt, in line with last year’s total.
Only 22 percent of those expecting a refund said they’d use it on everyday expenses, the second-lowest level in the survey’s history. Another 12 percent said they’d use it for a vacation, and 10 percent said they’d “splurge” on dining out, trips to a spa, or clothing. Another 9 percent said they’d use it to invest in a home improvement project, and 8 percent will use their tax refund to make a major purchase on anything ranging from a new TV to furniture, or a car.
“Younger consumers are being more mindful about their hard-earned money, especially those 18-24 who have already filed their taxes this year, higher than any other age group,” Prosper Executive Vice President of Strategy Phil Rist said in the statement. “Although this group is focused on allocating a portion of their refunds to savings, they are also more likely to use them for everyday expenses compared with any other age group.”
The decline in the number of Americans planning to make major purchases with their tax return this year could also help explain the dip in the March DS Index survey. Though some retailers told Dealerscope that they’re expecting consumers to come into stores with that money in hand, there was an overall drop off in confidence experienced heading into this month.