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Retailers, consumers and prices

Soaring gas prices sinking consumer spending, sentiment

May 21, 2008

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.

gas-prices.jpgAccording 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)

Comments

For this VERY reason, I traded my beloved SUV in on an economy car, and you know what? I like the economy car better, in every way.

Stores aren’t in any way helping the american public by marking everything up at least 20%, I mean I’m not in marketing, but it leaves me a little disgruntled as a poor college student when my grocery price doubled when gas went up. This is, in fact a nasty chain reaction. It’s unfortunate that not even CAPITALISM can be attributed to this problem..ehh, I guess we have to just keep on going right?

 

We need to find somewhere else to buy oil. They think it won’t matter but you never know until you try. I mean we are buying from Iran or Iraq or something like that and why would we buy from them. We are in their country. Duh they would raise the gas prices to any reason they can get.

Posted by Kelsey | Report as abusive
 

Once again big oil faced senators on Capital Hill and was unable to justify the price of energy at the pump. While thousands, perhaps millions across the nation are feeling the squeeze of unrestrained corporate greed, liberal democrat lawmakers are contemplating ways to bring to accounting those responsible for this wild economic chaos.

In their last appearance in the senate, CEOs of the major oil companies successfully defended their enormously wild profits and quickly let our elected representatives know who was in charge of this country. Using blackmail and almost strong arm tactics, they
strolled arrogantly from those chambers confident anything they threw at the consumer could be absorbed.

But perhaps this time they have gone too far. It’s a different set of faces there now and most of them are strongly in touch with their constituency. Not only are they hearing the clamor of consumer discontent, they see that corporate profit margin and are shocked at the enormity of it.

While big oil cites the supply and demand issue as the main reason for these staggering prices, a confidential and independent source suggest a surplus exists now far greater than at anytime in the last sixty years.

What consumers may very well be experiencing at the pump is fraud. Paying that which is unjust, unwarranted and uncalled for. Corporate fraud is not uncommon and once more today, before the Senate Judiciary Committee, it reared its ugly head.

It is a criminal act far exceeding Enron or WorldCom scandal, which could and should be prosecuted to the fullest extent of the law possible, not only holding not on the CEOs responsible but their Board of Directors also.

Posted by Tony | Report as abusive
 

Wow! Can we get anymore good news! When is the last drop going to be auctioned on Ebay.

Posted by GasMan | Report as abusive
 

I have a family of five of witch I must support. It is tough to make enough money now that the cost of food and gas have started rise beyond what we can afford. With that said, it’s very frustrating to here about record profits for the oil company’s. The run-a-way cost for fuel has a tast of greed to it. Right or wrong, this is American, screw OPEC, lets tap the oil we have here in the U.S.! I think we are quickly approaching tbe point where drilling here verses importing it will make more sense. We employ the American people here doing so, and we pay ourselves first. The Arab nation’s could careless about us!

Posted by Anthony | Report as abusive
 

If this were the 1930′s with the Great Depression creating massive unemployment and inflation…well…one or more countries might just start a war by annexing and occupying the oil fields of another country.

After all, the reasoning would be that this natural resource is sitting under certain artificial political boundaries as a result of nothing more than the “luck of the draw”

Of course, we are 70 years later and there is no great depression or massive unemployment and inflation…

…yet.

Jack

Posted by Jack | Report as abusive
 

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