Rising Gas Prices Take Toll on Consumer Optimism
ALEXANDRIA, Va. — Consumer optimism about the economy has fallen to its lowest level since August 2014 thanks to rising gas prices, according to new survey results released by NACS, the Association for Convenience & Fuel Retailing. Consumer optimism fell from 54 percent to 44 percent in the last month, marking the largest decrease in optimism in more than two years.
Gas prices increased 29 cents per gallon vs. the last month as refineries began the transition to producing the more expensive summer-blend fuel required in many United States markets. On average, gas prices increased by more than 50 cents per gallon during the February-to-May transition over the past 15 years, according to NACS.
Consumers expect the upward trajectory of gas prices to continue, with 73 percent reporting they believe gas prices will be higher in 30 days than they are today. This is a sharp uptick from the 58 percent who said the same in February.
Weather is another potential factor in consumer optimism. In the Northeast, which saw severe winter weather in the last month, optimism was lowest at 37 percent.
"While prices are rising, retail gross margins on gas are falling and now average 10 cents per gallon, about half of the 19 cents per gallon that they have averaged over the past five years," stated NACS Vice President of Strategic Industry Initiatives Jeff Lenard. "After factoring in expenses — especially credit card fees — profit margins across the country are slim or negative at the fuel pump now."
With gas prices rising, consumers say they are more sensitive to the price at which they will change their behavior, according to NACS. The median price at which consumers say they would try to cut down on their driving is $3.50 per gallon, down from $4 around the same time last year. The median price at which consumers would seek out alternatives to driving is $4.14 per gallon, down from $4.70 in March 2014. Both figures are the lowest since NACS launched its monthly consumer survey in January 2013.
"This lowering of the price threshold would seem to give evidence to the theory that consumers become much more sensitive to a spike after a period of lower prices," Lenard said. "Consumer optimism has fallen to the level of August 2014, when gas prices were $3.50 a gallon, more than a dollar a gallon more than today."
In more positive news, 19 percent of consumers say they will spend more money on consumer goods over the next 30 days, the highest level since the high holiday shopping levels of December. Younger consumers are most likely to spend and drive more this month, with 27 percent of those ages 18-34 saying they will shop more and 28 percent saying they will drive more, significantly higher than the 17 percent overall average.
Over the past five months, consumer optimism has closely tracked miles per dollar spent on fuel, which measures self-reported fuel efficiency and gas prices, NACS said.