Wall Street Journal out with a story today that contrary to earlier indicators the US consumer did indeed spend that gasoline savings. We've always thought that consumers were spending that money but they were doing it in a manner that's somewhat harder to gauge by economists. For example we think the American consumer may still go to the mall and by designer jeans, but they will wait for a sale or go to a discount mall to shop instead of paying full boat. Also we think instead of buying 2-3 pair at the store that consumer now just buys one. Oh and they may not buy at a store at all but make their purchases online.
Here's some of the highlights from the article.
"Individuals spent 78 cents of every dollar saved on gasoline, with about 18% of that going to eating out and 10% to groceries, according to the study. Other big categories included entertainment, electronics and appliances, and charitable donations.
The analysis finds distinct spending patterns by geographic and demographic background. The Midwest and South saw the largest drop in gasoline spending, for example. And low-income individuals saw the largest relative gains–the equivalent of 1.6% of income.
Gas spending represents less than 5% of consumer spending, so the impact from lower prices was small in absolute dollar terms and easily overshadowed by other economic forces, the report said."
There's several interesting nuggets in that article. One is that gas spending now represents less than 5% of consumer spending. Another that's not showing up in the article is that consumers may be spending 78% of that windfall but there's also 22% that's going to something else, likely to savings or to pay down debt. The more disturbing thing is as gasoline stays low and its lower cost gets built into family budgets and expectations, what will happen if/when the price of gas starts moving the other way?
Back early next week.
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