Consumers Use ‘Cushion’ to Afford Higher Gas Prices
Americans might complain about higher gas prices, but new government data show that hasn’t stopped them from driving to the mall, according to the Washington Post.
The Commerce Department reported today (March 12) that retail sales climbed 1.1% in February compared with the previous month. Consumers pulled out their wallets for new cars and clothes, electronics and sporting equipment despite spending 3.3% more at gas stations. The results boosted estimates of how fast the economy is growing, particularly as it comes on the heels of data showing a strengthening job market.
“Consumers are holding their own and have some extra cushion to withstand higher gasoline prices,” said Chris G. Christopher Jr., U.S. economist for IHS Global Insight.
The strong spending numbers offer a counterpoint to the public anger over rising prices at the pump.
What those pump costs mean for the economy has become a central question of the presidential campaign. A recent Washington Post-ABC News poll found that 65% of Americans are unhappy with the way President Obama is handling gas prices, driving down his overall approval rating. Republicans have seized on the sentiment to critique the president’s environmental and foreign policies.
Generally, economists worry that higher fuel costs will drive up inflation and leave households with less money to spend on other items. That can wind up depressing the nation’s gross domestic product because consumers are the backbone of the economy, accounting for roughly two-thirds of GDP.
But so far at least, those fears have not materialized. Sales in February rose in almost every category of retail. Automakers confirmed what had been reported as a strong month with a 1.6% spike in sales. And analysts were particularly heartened by increases in discretionary spending in sectors such as clothing, which was up 1.8% from the previous month. Even long-struggling department stores showed a hefty 1.5% gain.