mobanmarketThe drastically lower cost of gasoline was supposed to lead to a huge revival of consumer spending – why hasn’t that happened?
Economic theory assumes that if a consumer has more money available, they will spend it. One of American’s major expenses is on energy. Put these two together and consumers should be running amok on Amazon.com, eBay and local retailers – the numbers say it just isn’t so.
The issue is two-fold.
First, the decreasing cost of fuel only impacts those employed and needing transportation. Americans living off of transfer payments (EBT, wellfare, unemployment, etc) aren’t likely to go buy more goods just because regular unleaded finally dropped another .05 per gallon. They are on a fixed income and their income is not necessarily dependent upon their ability to get to a place of work.
Second, those that are dependent upon transportation to bring in a check do NOT believe that the lower prices are going to last more than a few weeks. Having felt the sting of the White House’s “necessarily skyrocket” energy policy, those families are hunkering down and keeping the savings close. Unless these energy prices start looking more mid-to-long-term, they aren’t about to go out to eat more, buy a new T.V. or visit the nearby amusement park.
The reason cheaper gas hasn’t miraculously resurrected consumer spending is that Americans understand that it is not White House policy, the economy or other longer term factors causing it to be low and they certainly do not believe that it will last.