I hear that the stimulus package just started in May and its effect will be felt over the next three months.
To this I will say c’mon guys, that stimulus package is already in the full force for the two full months. In early March we all knew how much it will be and when it will come (and if we qualify, unlike me, for example). Most people have credit cards and can pre-spend the check in advance.
That’s what they did, the just released data show that consumer credit in March rose $15 bln, well above expected and above $5 bln in January. I assume that most people are making the best efforts to manage their finances and if they increase debt in the face of obvious economic difficulties I assume they do it within the margin set by this check in the mail. So those who planned to spend the check are already doing so.
The second category of people are those who don’t have any credit lines left and can’t pre-spend the check. I assume that those people have horrible debt situation and whe they get the check it will go straight to pay the pile of bills. Those people will not spend much when they get this check.
And the third category of people are those who don’t plan to spend it at all. It will go to savings, to reduce debt, to pay for the college for the Fall and stuff like that.
Looking at all this I think I can estimate that about $60 bln of the $110 bln stimulus package will be spent and the rate of spending is set in March, i.e. about $15 bln/months. So the last dime will be spent during the 4th of July fireworks. The recession, which is interrupted by now, will resume in July. Plan accordingly.