Where’s The Spend
Nowhere is this more apparent than in the areas of consumer debt loads and cost of living. Many economists feel consumers will adopt a “common sense” approach to spending and how they deal with their personal debt. This school of thought asserts that consumers will make the “logical” choice and use the funds to either pay down debt or apply them to daily expenses. It is assumed consumers will act logically and in their own best interests. This assumption is strong, but from a financial point of view consumers rarely act in their own best long-term interests.
This doesn’t mean the average consumer behaves destructively or against self-interest. It simply means that the rebates are perceived “differently” than other areas of consumer income or credit. In this case, consumers perceive the funds more as a “windfall” than as traditional income. This distinction could mean good things for retailers.
Unlike other periods in our recent history, a feeling of “patriotism” or a “need” to spend will fuel buying decisions. Consumers will decide for themselves what the funds should be used for. However the “windfall” spending scenario is a powerful one, not just for consumers but also for retailers.