Lower gas prices not enough to lift US economy
Wednesday, June 13, 2012
WASHINGTON (AP) — Cheaper gas has yet to cause consumers to spend enough on other goods to boost the slumping economy.
Americans barely increased their spending at retail businesses this spring, leading economists to predict slower economic growth in the April-June quarter.
But the news from a spate of government data Thursday wasn’t all bad. Consumers spent more in May on cars, appliances and furniture — big purchases that help drive growth. Businesses continued to restock this spring at a healthy pace.
And wholesale prices outside of gasoline costs remain stable, which means consumers can expect inflation to stay mild.
If gas prices stay low, Americans are likely to spend more freely this summer on other goods, from autos and furniture to electronics and vacations, that fuel economic growth. Gasoline purchases tend to provide less benefit for the U.S. economy because some of the money goes to oil-exporting nations.
“The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items,” said Paul Dales, senior U.S. economist at Capital Economics.
Ian Shepherdson, chief U.S. economist at High Frequency Economics agreed. “The drop in gas prices means summer spending will accelerate,” he said.
Retail sales fell 0.2 percent in May and April, the Commerce Department said. It was the first back-to-back decline in two years. But overall sales were pulled down by a 2.2 percent decline in gasoline station sales, reflecting the lower prices.
Excluding volatile gas station sales, retail sales grew just 0.1 percent in May and dipped slightly in April.
Consumers reduced spending in May at building supply stores, such as Home Depot, and general merchandise stores, a category that includes Wal-Mart and Target.
Auto sales rose solidly, one of the few positives in the report. Consumers also spent more on electronics, clothing and furniture.
The one major positive development in the past two months is that gas prices have tumbled.
The producer price index, a measure of wholesale prices, dropped 1 percent in May, the Labor Department said in a separate report. That’s the biggest decline since July 2009. It reflected a 9 percent fall in wholesale gas prices.
Consumers are already feeling less pinched by gas prices. The average national price for a gallon of gas was $3.54 Wednesday — 40 cents cheaper than the year’s peak price in early April.
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