More money in your pocket usually means more spending, but that’s not the case this summer. The Wall Street Journal reports that even as the average price for a gallon of regular gasoline dropped to $3.53 last week, making it the 11th straight week of lower gas prices, Americans are still tight on money.
While gas prices continue to fall, it appears consumers are still weary of a weak economy, and as a result, they’re not spending the money they’re saving. Government reports reveal overall retail sales are down, and although car sales were strong in May, consumers weren’t spending money at places like restaurants or retail stores. Though it’s only a matter of time before consumers notice their savings and start spending, some economists believe the stagnant job market is causing uncertainty in spending. For example, when gas prices stooped to nearly $1.50 a gallon in 2008, retail sales also dropped 11 percent because of the weak job market and economy. By contrast, Americans spent more cash earlier this year when the employment situation was improving, despite rising gas prices.
“The more uncertain people are, the less likely they are to spend, and the more likely they are to put additional purchasing power into savings,” Mark Vitner, senior economist at Wells Fargo Securities, told the Wall Street Journal. Others believe the best is yet to come. “The bulk of the response by consumers to that drop is ahead of us,” economist Dean Maki said in the same report, noting that prices for groceries, drugs, and gas all fell in May from the previous month for the first time in two years.
What do you think? Do dropping gas prices hint at a recovering economy? Or do you think it’s only a matter of time before they spike back up? Let us know in the comments below.
Source: The Wall Street Journal