Vision - May/June 2008 - (Page 6)

THe ecONOMIST ANALYZING FUTURE TRENDS] • [ BY SHAWN G. DUBRAVAC, CFA This May, the first of the tax rebate checks will begin arriving with the bulk of checks hitting mailboxes in June and July. Estimates suggest the average household will receive just under $1,000. The question is how will households spend this increase in new found disposable income? Roughly 19 percent of all households—more than 21 million households collectively—intend to spend some of their rebate checks on consumer technologies. Cashing the Checks As Figure 1 illustrates, households plan to spend these checks in a myriad of ways. CEA estimates households plan to save CEA estimates households will spend or invest about 22 percent of their rebate just under $5 billion of their total 2008 tax checks in aggregate and use an additional rebate on consumer electronics or about 21 percent to pay down debt or other four and a half percent of the total tax rebate bills. After donating or otherwise giving package. As 2008 began, CEA forecast six away five percent of their tax rebate percent growth for the industry checks, the average household plans this year. Whether this $5 billion to spend roughly 50 percent of their represents incremental growth— checks across a variety of categories. pushing the 2008 growth rate up as Households also plan to spend these high as eight percent—remains to checks relatively quickly—spending be seen. But there are signs the tax them on average within two months rebate will drive some incremental Shawn G. DuBravac of receiving them. growth. For example, about nine Roughly 19 percent of all households— percent of households indicate they likely more than 21 million households collec- will buy a more expensive product than they tively—intend to spend some of their rebate would have otherwise sans the tax rebate checks on consumer technologies. As Figure checks. An additional 19 percent indicated 2 highlights, computers are showing up at they might spend more than they otherwise the top of wish lists. More than 50 percent had planned. This suggests some consumers of the above mentioned households plan to might gravitate toward more expensive prodspend some of their tax rebate checks on PCs. ucts and services when their checks arrive. Households also are showing a proclivity toward televisions and mobile phones, with Increase in Expensing 39 percent and 23 percent of households say- CEA’s analysis of the Stimulus Act of 2008 ing they will spend some of their tax rebate was largely reserved to the tax rebate checks on these products, respectively. being mailed to U.S. households. But How the Tax Rebate Checks Will Be Cashed O n February 13, 2008, President Bush signed into law the Economic Stimulus Act of 2008. This $168 billion stimulus package provides four primary benefits through temporary adjustments to the current tax code: 1) Advance tax rebates for individuals 2) 50 percent special depreciation allowance for 2008 3) Increase in small business expensing limitation for 2008 4) Temporary conforming loan limit increases for Fannie Mae, Freddie Mac and FHA. Certainly, the most talked about component of the law is the tax rebate portion where $112 billion will be distributed to U.S. households. These tax rebate checks are analogous to a temporary tax cut and similar in nature to the tax rebate checks distributed in 2001 as part of the Economic Growth and Tax Relief Reconciliation Act. Charles Waller/Getty Images Source: CEA Market Research 6 May/June 2008 www.ce.org http://www.ce.org

Table of Contents Feed for the Digital Edition of Vision - May/June 2008

Vision - May/June 2008 Contents Shapiro's Spectrum In This Issue The Economist C4 Trends Visionary Making the Smartphone Truly Intelligent Shipping Strategies for CE Companies IP in BRIC Countries CEA Newsline Tech Speak Eye on Business Tech Policy Market Insider Just the Stats

Vision - May/June 2008

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