Check out the fading influence of tax rebate checks.

Tax rebate checks helped boost June retail sales but their influence appears to have petered out by July, according to data released by the Commerce Department on Wednesday.

The figures showed that total sales at U.S. retailers declined 0.1 percent in July, which was in line with forecasts made by Wall Street economists. A big reason for the drop was a fall off in auto sales. Auto and auto parts sales fell 2.4 percent in the month, their biggest drop since April, and were off a whopping 10.5 percent from year-ago levels. 

But excluding autos, retail sales were up 0.4 percent in July. That was roughly in line with forecasts, but down from a 0.9 percent rise in June. 

Economists said before the numbers were released that spending has been supported by government stimulus checks but that the stimulus effect was waning in July because most of the checks already have been issued. Meanwhile, prices for many food items are on the rise and there was only a slight moderation in gasoline prices during the month. 

The Commerce Department said gasoline sales in July were up 0.8 percent after a 4 percent June jump. But reflecting higher prices, gasoline sales were 24.6 percent higher than in July last year. 

Excluding gasoline, retail sales in July fell 0.2 percent after a 0.1 percent June decline.

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(Photo: Reuters)

Check out all those billions of dollars in U.S. tax rebate checks failing to give June retail sales much of a boost.

The Commerce Department said on Tuesday that total sales at U.S. retailers rose a less-than-expected 0.1 percent in June.  Economists polled by Reuters had forecast total retail sales to rise 0.4 percent in June, following a 0.8 percent gain in May.

Part of the weaker-than-expected results were due to falling demand for cars. Auto and auto parts sales fell 3.3 percent in June — their worst month since February 2006.  But even excluding autos, retail sales rose 0.8 in June, which was below the consensus estimate of 1.0 percent. Excluding autos, building supplies and gasoline, retail sales rose 0.4 percent in June. 

Economists had expected government tax rebate checks to give a bigger boost to retail sales in June, despite the weak overall U.S. economy, as shoppers had excess cash to spend. But last week, major retail chains, like J.C. Penney,  Target and Gap, released their June sales results and many did not see a rebate boost. Penney said it might have received a “modest” sales lift from the checks but any benefit would be “short lived.”

So where did the billions of rebate cash go?

Well, Wal-Mart got a chunk. Its June U.S same-store sales rose at their highest level in years as traffic in its stores jumped. The retailer had offered to cash tax rebate checks for free.

Surging gasoline prices likely gobbled up an even bigger chuck of the rebate dollars. The Commerce Department said gasoline station sales rose 4.6 percent in June as motorists faced higher prices at the pump. Over the past year, gasoline station sales have jumped 24.5 percent to nearly $46 billion last month, on a seasonally adjusted basis.

Charles Grom, a retail analyst with JP Morgan, estimates that every 1 cent increase at the pump, translates into $1.4 billion of lost consumer spending power. “Therefore, the (roughly) $1.00 jump in retail gas year-over-year should more than offset the $106 billion stimulus package,” he wrote in a note last week.

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(Photo: Reuters)

Check out the loss of more retail jobs. 

Another 27,000 retail jobs disappeared in May, according to the U.S. government’s monthly employment report. That makes 152,000 retail jobs eliminated since the beginning of the year.
 
Overall, nonfarm payrolls fell by 49,000. But even more worrisome for the economy and for retailers could be the jump in the unemployment rate to 5.5 percent. That half-point jump was the largest such move in 22 years and brought the unemployment rate to its highest level in 3-1/2 years.
 
Retailer’s May sales reports yesterday were mostly better than expected, causing some analysts to think they could signal the beginning of a consumer turnaround.
 
But others said it just showed a blip in spending that was caused by the tax rebate checks consumers have begun to receive. 
 
Economic concerns could still linger after all that stimulus money is gone, they say, and things could get worse if consumers, already hit by $4-a-gallon gasoline, soaring food prices and falling home values really start to worry about their jobs.

Wonder how a half-point jump in the unemployment number plays into that?
 
Meanwhile, to take your mind of the jobs report, there’s always the company pep rally that masquerades as the Wal-Mart annual meeting. The world’s-largest retailer flies in employees from all around the world to help pack the basketball arena at the University of Arkansas, where stars entertain the crowd (this year’s acts include Miley Cyrus), everybody does the Wal-Mart cheer, and, oh yeah, shareholders get to ask questions.
 
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 (Photos: Reuters)

The average price for gasoline soared 6.9 cents over the last week to a record of $3.79 a gallon. That means the national price for regular, self-service gasoline is now up 57 cents from a year ago, according to data relased by the federal Energy Information Administration on Monday.

With personal income stagnating, consumers are finding it hard to offset the ongoing spike in gas prices.

According to the latest Discover U.S. Spending Monitor, which polls consumers on their spending habits, 54 percent of consumers are cutting back on basic living expenses, like grocery shopping, to compensate for the high cost of gas. 

Nearly 55 percent are cutting back on discretionary spending, like eating out and going to the movies. 

High gasoline prices have soured economic sentiment. Seventy-four percent of consumers think the U.S. economy is getting worse – up two and a half points from the week before, according to the survey. 

In addition, nearly 54 percent think that their personal finances are deteriorating.   

Meanwhile, the Deloitte Research Leading Index of Consumer Spending has reached its lowest level since 2001. The index tracks consumer cash flow as an indicator of future consumer spending.

“This significant drop in the Index gives us empirical data of what many have long suspected,” said Carl Steidtmann, chief economist with Deloitte Research and author of the monthly index. “The current economic downturn is as significant as anything we have seen since the last recession.”  

Deloitte said retailers are now trying to aggressively court consumers to get them to spend their tax rebate checks in their stores.

But unless they sell food of fuel, retailers could face big challenges in that arena.

According to the most recent survey by the National Retail Federation,  U.S. consumers will use much of their tax rebate money to pay for increasingly expensive gas and groceries, rather than spend it on electronics or clothes. 

(Photo: Reuters — “A man walks beneath a sign advertising the price of gasoline at a filling station in San Francisco, California on April 28, 2008)