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Will "Rising" Gas Prices Crush The Holiday Spending Spirit?
As we noted previously (here and here), the exuberance over 'lower' gas prices is a little overdone. Perhaps more worrying though, as Bloomberg's Jo Brusuelas notes, wholesale gasoline futures are pointing to about a 5% rise in gasoline prices during the next few weeks. This would essentially erase the entire decline in gas prices seen since Sept. 1. As Brusuelas warns, because recent gains in inflation-adjusted personal disposable income on a per capita basis can be directly tied to falling gasoline prices, rising prices may come at an inopportune time for many larger retailers.
Via Bloomberg's Joseph Brusuelas,
Real per capita disposable income is up 0.9 percent on a year ago basis – weak under any conditions. The reversal of those modest gains due to rising gas prices would not bode well for what is shaping up to be the most challenging holiday spending season since 2009.
Consumer spending and sentiment are notoriously sensitive to price increases at the pump. If gasoline futures are correct, the 5 percent increase in prices may result in as much as a $40 billion hit to consumer wallets just as the traditional holiday spending season hits its stride during the next few weeks.
While gasoline prices are down 16 percent since the February peak, the combined effects of the $148 billion increase in tax rates on upper income households and the resetting of the payroll tax effectively offset potential early-year gains in personal disposable income.
For middle income consumers and those further down the income ladder, small changes in disposable income can have a significant effect on discretionary spending. Among this group, 48 million individuals receive food stamps and will already see a net loss of about $16 billion in transfer payments due to cuts in the Supplemental Nutrition Assistance Program.
Under conditions of weak income growth and modest employment gains, aggressive discounting by retailers has not translated into a sustained acceleration in overall spending.
Demand for services has averaged 1.8 percent during the expansion, well below the 3 percent level seen during the previous two business cycles. On a year-ago basis, overall retail spending peaked in 2010 and has continued to decelerate since.
Meanwhile, November gains in retail outlays were directly tied to transitory events rather than a broader shift in the overall behavior of consumers. Auto purchases in October were pushed forward into November due to the government shutdown. The spillover of the “iPhone effect” into November also temporarily boosted the overall level of spending and probably helped mask underlying weakness in the retail sector.
Since the end of the Great Recession, the upper two quintiles of income groups have emerged relatively unscathed while the lower three quintiles continue to bear the disproportionate burden of the adjustment underway in the domestic labor market and broader economy. This suggests the status quo in the economy and overall spending will probably continue to hold; upper-income consumers benefiting from historically low interest rates, home price increases and appreciation in equity markets will contribute the lion’s share of gains in holiday spending this year.
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Fuck no it won't. That's what credit cards are for.
Economy class sittong in Pan Am 747 late 60s
http://beautifulpic4all.weebly.com/31/post/2013/11/economy-class-seating-on-a-pan-am-747-in-the-late-1960s-see-how-bad-things-are-now.html
Why even discuss the price of pertol?
Everybody drives electric cars these days!
They're free!
especially when you plug it ito your 97 year old crippled neighbor's outdoor plug
With the high cost of petrol, I can't afford the Dollar General gift cards I was going to give for X-mas.
Times are - a changin'.
Two things made that go away.
Fuel prices.
Pilot prices.
Pilot prices have been gutted. Fuel prices can't be.
Technically not much has changed, except for the people being a lot bigger (wider) than in the 1960s.
REVOLSL <GO>
But I make so money that they tell me I can't use the credit card at the end of the month. And don't tell me it my 70% spending either.
Amerikans are resilient, where have I heard that and now the for the pussification to continue.Nothing will dampen the "holiday spirit" because the masses are unwilling to face - or even recognize - reality. The Spend key is the only one that churns faster than the Print key.
Credit, rising stock prices, and commodity deflation will prevent that from happening. Plus, if necessary the government can pass some sort of law prohibiting high gas prices.
The "fair" pricing act... because Big Bro knows best.
aka "Directive 10-289"
and seriously, I'm sick of seeing the bogus unemployment numbers reported, and re-reported.
Oh, and one more thing...
FUCK YOU, BARRY!!!
ah, yes, the start of price controls.........
Sounds like a lot of Wall St. crooks are very worried that the 'Holiday Sheeple Credit Shearing' might not be so great this year.
Never under estimate the power of the sheeples. They are already preprating to go shopping till they drop. Must have the large screen tv and the IPADS
Well I can't speak for what others are doing, but our Christmas is planned to be very low-key this year.
Also, I'm not really sure how everyone has figured all this retail spending will be such a bumper this year....last one sucked. Did we forget that?
My Christmas budget is right at $.00 this year. If any family for friends happen to stop buy I'll put on a good feed, otherwise, zip. I'll always feed anybody at any time, and consider myself fortunate that I can provide food for others, but the rest of the shit, they are on their own.
haha, no xmas spending here, there is no discretionary income not being applied to future scenarios, plus i am on strike against consumerism.
tyler, thanks for the analysis above.
however, as we all know by now, it really does not matter if holiday spending was crushed, the dow, nasdaq and s&p will never have a significant red day again and will only be green from here on out.
fundementals, economic data means nothing, printing is the new wealth effect.
No, the FED will keep buying: BULLISH!!
EPA's winter blending rules ensure cheaper gas prices ( until the boyz punch holes in the refinery piping )
Time to stop buying gasoline, pump up the bicycle tires.
Zero Christmas spending. No trips, no restaurant meals.
Those who wanted Christmas greetings and displays to disappear ought to be very happy. I hope they won't be disappointed that their part of the annual Christmas take disappears as well. Be careful what you wish for.
50 bucks this morning to fill up the beast and I don't do a hell of a lot of driving unless I can avoid it.
I have cut virtually all descretionary spending - haven't been in a store shopping for ages, don't eat out hardly at all, only buying essentials when necessary.
And I'm probably a fairly good stand in for the what used to be a robust consumer back in the 90's and 2000's.
And yet when I do walk into an upscale resturant for an expense account meal the place is packed. There is a huge disconnect going on in the economy.
Ditto. Ditto. Ditto. And a big ditto. The eating out being packed is really making me talk to myself. Could I be way wrong ???
Lower gas prices my fucking ass ! Gas has doubled since fucktard is the president!
"Under my Administration, Energy prices will necessarily have to increase to the level at which all of you except me will be broke."
Big Oil makes sure they get there Holiday spirit first. Retailers can go to hell.
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She's $1.28/litre in Toronto right now. $4.83/US gallon
And oil is $93-4 a barrel?
The last time we saw $1.28 was when oil was about $135/barrel 5 years ago. Nice margins. No inflation here.
We send our oil down to you guys, to pay this price from these oil company cocksucks?
•?•
V-V
Not yet, three weeks.
I really hope the monkey with the hand grenade shoves it up his ass thinking it is a gerbil.