Even though real incomes are dropping and people are worrying about their jobs — a drop in gas prices has lead to a push in retail spending, says the New York Times.
Consumer spending rose in 0.6% in November — its largest gain in 2 years.
“The declines in gasoline prices have been extremely large, larger than anything we’ve seen in the past,” said Dean Maki, chief United States economist at Barclay’s Capital. “That’s providing a lot of spending power to households.”
Gasoline prices have plunged to $1.66 a gallon from their July peak of $4.11 as Americans drove less, construction projects were halted and the global appetite for oil waned in the economic slowdown. Filling up a 15-gallon tank now costs about $25, compared with $60 this summer.
“It’s a very substantial amount of money that’s been freed up,” said Abiel Reinhart, North American economist at JPMorgan Chase. “That’s a definite positive for consumers. It’s probably the only positive at this point.”
The good news from a personal finance standpoint is that you’re not just spending all the money you’re saving on gas. The Commerce Department reported that the personal savings rate increased by 1% in November.
Drop in Gas Prices Offers a Bit of Relief for Consumers [NYT]
(Photo: C. Barr )