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Falling gas prices could be a good sign for retailers

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Yahoo Finance Live's Brian Sozzi provides his take on falling gas prices and what this could mean for retailers.

Video Transcript


- Consumers are spending more money, at least according to some new data out of Citigroup. Credit card spending in the first week of July increased by 7.4% versus the last week of June.

Brian Sozzi says one of the reasons for this might be the price of gas. That's where we find Sozzi's take today. Sozz?

BRIAN SOZZI: Yeah, I'm always looking for abnormalities in data, especially right now when everything is so negative. So we saw that red hot CPI reading this morning, up 9.1%. We've seen consumer spending slowing down. You see Victoria's Secrets laying off 5% of its workforce.

So here's some new data out of Citi. Now, you mentioned, Brad, that sales last week, for the week ending July 9, they were up 7.4% year over year. That is an acceleration from the week before, which sales were up 6.2%.

That caught my attention. Excluding auto retail sales, they were up 5.2%, that was an acceleration from 2.4% the week before. So you're seeing more spending, it appears, at least using this credit card data from Citi, at a time where gas prices are coming down.

Some of the big categories that are seeing growth right now, that is food retail, general merchandise stores, department stores, apparel retailer, home furnishings, and computer and electronics.

Now, I'm not saying we've hit, maybe, some form of short term bottom in spending. But this data-- I would like to see another week or two of it to confirm any trend-- but this is suggesting that consumers may be spending a little bit more.

They're taking that savings they are seeing at the pump and spending it a little bit more, to a greater extent, than what they have were in June.

Now, June was a bad month for retail. This data suggests we're starting to see a little turn, as does Costco. Good month of sales from Costco this week.

- Are people also spending more on gasoline, though? In other words, not per gallon, but is there-- ? We keep saying the cure for high prices is high prices.

BRIAN SOZZI: Well, that's my take. I'm just trying to look forward to the holiday season.

You know, this data-- And again, this is just some early preliminary data. We still have to get through retail earnings season. The news remains concerning-- but this would suggest, if we can get gas prices down, if they come down further, perhaps consumers will go back to spending a little bit more than they had been in May and June.

- OK. So I guess what I'm saying, a couple of things, A, people could just be filling up their tank more than they were before as they see gasoline prices come down. That could be part of it.

And you keep saying that people are saving. But they're not saving money. I mean, like, yes, it's down a little bit from May. But year over year--

BRIAN SOZZI: If you have an SUV and suddenly now you're saving 25 to 40 bucks, week over week, maybe that's a pair of jeans.

- I don't know. Do people really see it that way if it's-- ? I don't know.

- And also, does that still push you to buy more in the holiday season, just because week over week, or month over month, your expenses might be down, even though the damage perhaps has already been done, as you started to tap some of your savings?

BRIAN SOZZI: We're going to need some more data. This just is some of the first data that I've seen that has called out an acceleration in sales, which is completely contrary to everything we've been hearing, or everything we've been hearing from retail, over the past few weeks.

Just something to tuck away, just keep in mind, as we start to hear some of these retailer earnings, that some of this credit card data is starting to show, perhaps, the consumer, there's a little life there.

- Well, one of the things that stuck out to me from the Mastercard SpendingPulse data that Michelle Meyer brought us yesterday is the jewelry spend was up.

BRIAN SOZZI: That was good. Also good data.

- That really stood out to me amongst all the other stuff because that is such a purely discretionary item. And it was up something like 16%. I think those were June numbers if I'm not mistaken.

BRIAN SOZZI: Is it discretionary? We all need a new watch.

- Mmm, I don't think so.