Retailers, consumers and prices
Soaring gas prices sinking consumer spending, sentiment
The average price for gasoline soared 6.9 cents over the last week to a record of $3.79 a gallon. That means the national price for regular, self-service gasoline is now up 57 cents from a year ago, according to data relased by the federal Energy Information Administration on Monday.
With personal income stagnating, consumers are finding it hard to offset the ongoing spike in gas prices.
According to the latest Discover U.S. Spending Monitor, which polls consumers on their spending habits, 54 percent of consumers are cutting back on basic living expenses, like grocery shopping, to compensate for the high cost of gas.
Nearly 55 percent are cutting back on discretionary spending, like eating out and going to the movies.
High gasoline prices have soured economic sentiment. Seventy-four percent of consumers think the U.S. economy is getting worse – up two and a half points from the week before, according to the survey.
In addition, nearly 54 percent think that their personal finances are deteriorating.
Meanwhile, the Deloitte Research Leading Index of Consumer Spending has reached its lowest level since 2001. The index tracks consumer cash flow as an indicator of future consumer spending.
“This significant drop in the Index gives us empirical data of what many have long suspected,” said Carl Steidtmann, chief economist with Deloitte Research and author of the monthly index. “The current economic downturn is as significant as anything we have seen since the last recession.”
Deloitte said retailers are now trying to aggressively court consumers to get them to spend their tax rebate checks in their stores.
But unless they sell food of fuel, retailers could face big challenges in that arena.
According to the most recent survey by the National Retail Federation, U.S. consumers will use much of their tax rebate money to pay for increasingly expensive gas and groceries, rather than spend it on electronics or clothes.
(Photo: Reuters — “A man walks beneath a sign advertising the price of gasoline at a filling station in San Francisco, California on April 28, 2008)