Consumers Already Cut Spending Because of Rising Gas Prices - Engine Builder Magazine

Consumers Already Cut Spending Because of Rising Gas Prices

With the national average fuel price at approximately $3.20 per gallon at
the time the survey was conducted (Feb. 25-28) another 18% say they
would reduce spending if gas prices climb to $3.75 per gallon.
Forty-one percent place their pain threshold at $4 per gallon or more.

“There has been quite a lot of debate about the impact of rising
gasoline prices on consumption in general,” said RBC Capital Markets
chief U.S. economist Tom Porcelli. “Specifically, the conversation
focuses on what particular price level of gasoline would lead to a
shift away from discretionary spending. The RBC survey finds that this
level has already been breached for 33% of consumers and is within
range for another 18%. Somewhat encouragingly, however, is that 40% of
Americans place their threshold at or north of $4 per gallon.”

Consumer confidence for March sank for a third straight month, with the
RBC Consumer Outlook Index sliding to 42.5, down 2 points from
February’s 44.5. The March decline followed smaller decreases the two
preceding months, as consumers were further affected by climbing fuel
and food prices, instability in the Middle East and budget battles in
Washington, D.C.

“What really stands out to us is worry about the future,” said
Porcelli. “The geopolitical issues of recent weeks are seeping into
expectations about markets and respondents’ financial position. The
number of people who expect the value of their investments to ‘get
worse’ rose to the highest level in four months. The erosion in
personal finances has translated into people thinking they will have
less to spend on discretionary items, and that number rose to the
highest level in at least a year.”

The survey found growing concern about inflation, with consumers
expecting that higher raw material costs will drive even greater price
increases in the sectors already giving them the most trouble. Roughly
nine-in-10 consumers (93%) expect to see higher oil and gasoline
prices, and 90% expect to see higher food and grocery costs. Consumers
had lower inflation expectations for durable goods, with 66% expecting
higher prices for clothing, 56% for automobiles and 52% for appliances.

From Tire Review, an Engine Builder sister publication

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