Where's The Boost From Rebate Checks?

Tax rebate checks may not be much of a match for $4 a gallon gas prices.

AP Consumers are either paying down debt or squirreling away rebate checks, an economist says.

The weaker-than-expected retail sales report implies tax rebate checks aren't doing too much to stimulate the economy, according to Merrill Lynch Economist David Rosenberg.

"The numbers suggest that prudent consumers are either paying down debt or squirreling it away in savings account, though the surge in gasoline station sales suggests a fair bit is being siphoned off to energy companies as well," Rosenberg said, in a research note Tuesday.

Some $80 billion in tax rebates checks have been delivered to consumers as of June 30, Rosenberg said.

Earlier Tuesday, a Commerce Department report showed total sales at U.S. retailers rose a less-than-expected 0.1 percent in June, as auto sales suffered their biggest drop in more than two years.

Economists polled by Reuters before the Commerce Department report had forecast total retail sales to rise 0.4 percent in June after a 0.8 percent gain in May that was initially reported as a 1.0 percent rise.

According to Rosenberg, the 0.1 percent gain was generous as soaring gasoline prices boosted sales at service stations by 4.6 percent month-over-month. Excluding gasoline sales sales were down 0.5 percent.

Most of the weakness is in sales of discretionary items such as cars, electronics, restaurant sales, suggesting consumers continue to tighten their belts and watch spending carefully.

"The numbers have shaved our 2Q consumer spending forecast to 1.4 percent from 2.3 percent," Rosenberg said. He's now shaved his estimate for second-quarter gross domestic product to 1.5 percent.

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