May 5 (Bloomberg) -- Wal-Mart and OPEC are battling for the tax rebates the U.S. government began handing out last week. The result may be a draw for the economy.
While consumers might spend enough of the $117 billion stimulus at retailers to keep the U.S. economy afloat in the months ahead, the boost from their purchases will be diluted by gasoline prices at $3.62 a gallon and rising.
The upshot: The U.S. might avoid an outright contraction in the second quarter and still be saddled with sluggish growth typical of Europe, which expanded at a 0.9 percent annual pace in the six quarters following a 2001 recession.
``It feels like the U.S. is taking a European holiday,'' says Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. ``We're in for a long period of growth hugging 1 percent.''
Since President George W. Bush signed the stimulus package in February to much fanfare, the price of a gallon of gasoline has risen 64 cents, according to AAA, the nation's largest automobile club. That's boosting the coffers of the Organization of Petroleum Exporting Countries while robbing consumers of nearly $23 billion in spending power on a quarterly basis.
Food prices, too, have climbed at an annual rate of 5.1 percent since the start of the year, meaning another possible $5 billion or so bite out of consumers' buying potential.
The increases will eat into the $25 billion to $50 billion economists expect the rebates to add to spending in the coming months. Personal consumption accounts for more than two-thirds of the U.S. economy
``A lot of that stimulus money is going to go to filling the gasoline tank and the refrigerator,'' says Mark Zandi of Moody's Economy.com in West Chester, Pennsylvania. ``It's not going to be quite the boost that most of us were hoping for when it was put together a few months ago.''
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