Higher gas prices crimp consumer spending
Higher gas prices are crimping consumer spending and slowing the already-weak U.S. economy. And they could get worse in the coming months.
The Federal Reserve this week took steps to boost economic growth. But those stimulus measures also are pushing oil prices up. If gas prices follow, consumers will have less money to spend elsewhere.
The impact of the Fed’s actions “is likely to weigh on the value of the U.S. dollar and lift commodity prices,” said Joseph Carson, U.S. economist at AllianceBernstein. “We would not be surprised if [it] fueled more inflation in coming months, squeezing the real income of U.S. workers.”
Americans already are feeling pinched by high unemployment, slow wage growth and higher gas prices.
Consumers increased their spending at retail businesses by 0.9 percent in August, the Commerce Department reported Friday. But that was largely because they paid more for gas. Excluding the impact of gas prices and a sizeable increase in auto sales, retail sales rose just 0.1 percent.
Perhaps more telling is where Americans spent less. Consumers cut back on clothing, electronics and at general-merchandise outlets — discretionary purchases that typically signal confidence in the economy.
Gas prices have risen more than 50 cents per gallon in the past two months. The national average was $3.87 a gallon Friday. Most of the increase took place in August, which drove the biggest one-month increase in overall consumer prices in three years, the Labor Department said Friday in a separate report.