U.S. stimulus effective in lifting spending-study

WASHINGTON (Reuters) - Tight-fisted U.S. consumers wary ofanaemic economic growth opened their wallets between May andJuly and spent their economic stimulus checks, a recent studyhas found.

"Our findings underscore the potency of the economicstimulus payments in stabilizing consumer spending duringrecessions," said authors Christian Broda of the University ofChicago and Jonathan Parker of Northwestern University.

The typical family increased their spending on food,mass-merchandise and drug products by 3.5 percent when theirgovernment stimulus checks arrived, the study found.

The extra spending implies the average recipient spentabout 20 percent of their stimulus checks on non-durable goods-- goods such as paper products and food items that are used upquickly, the authors wrote.

According to the study, the overall nondurable consumptionin the second quarter has been boosted by 2.4 percent directlydue to the stimulus payments, and will be held up by about 4.1percent in the third quarter.

The government releases its first accounting of second-quarter economic growth on Thursday and economists expect itwill show a sharp pickup.

Earlier this year, the Democratic-led Congress and theRepublican Bush administration forged bipartisan cooperation tohammer out a package that includes billions of dollars inone-time rebates to taxpayers.

In February, President Bush signed the $168 billion (85billion pounds), two-year economic stimulus package into law tostave off an election-year recession.

In total, 112.4 million stimulus payments have been sentout, injecting $91 billion into the U.S. economy, according tothe U.S. Treasury Department.

RETAIL BOOST MAY FADE FAST

Government data shows the stimulus payments gave a biggerboost to retail sales in May than in June, and many economistshave said the positive effects will subside in the second halfof the year, leaving the economy at risk of recession.

The study showed that low-income and low-asset householdsraised their spending at nearly double the rate of the averagehousehold and that shoppers in general spent a higher share ofthe rebate in discount stores such as Wal-Mart Stores Inc andTarget Corp.

The professors said they tracked the weekly expenditures ofmore than 30,000 households who received or were about toreceive payments in order to determine the effectiveness of theprogram.

"We find that to a significant extent (it) succeeded: wefind that the stimulus payments are initially being spent atsignificant rates," the authors said.

They said the rates at which the payments were spent wereslightly higher than those observed in 2001 when a similarprogram was put in place that was credited with helping end the2001 recession.

(Reporting by Nancy Waitz; Editing by Jan Paschal)