A penny more for gas, $1 billion less for Walmart

April 27, 2012

Jessica Wohl and Chris Reese contributed to this post.

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For every penny rise in the price of gas at the pump, U.S. customers of Walmart take a collective $1 billion hit to their disposable income.

That astounding figure, from Wal-Mart Stores Inc’s U.S. division chief merchandising officer Duncan Mac Naughton, was largely overlooked when he disclosed it at a Barclays conference earlier this week. But the statistic is highly relevant to the macroeconomic outlook, and explains why Fed officials and economists start to worry every time the price of gasoline starts to rise.

With 140 million U.S. customers a week, Walmart –  the world’s biggest retailer – is the recipient of a good chunk of U.S. consumer spending, the biggest input to U.S. economic growth. Now that gas prices have stopped rising, the pressure is off. But the impact on Walmart customers may help explain a curious trend Credit Suisse economists have identified in U.S. jobless claims, which seem to go up every time gas prices rise and fall when pump prices slip.

In a research note, the economists write:

This puts prices at the pump in the crosshairs. Gasoline is the most visible price in the US economy; it’s posted outside and it’s seen by buyers very frequently. More than one thing goes into the decision to layoff workers. It can’t just be a gasoline story, can it?

If paying a penny more for gas means a $1 billion hit to the pocketbook, maybe it can.

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