Gas prices are on the rise: How it will impact consumer sentiment
The national average gas price is $3.82 a gallon, rising from $3.54 from a month ago, but decreasing from last year when prices were $4.59 a gallon, according to AAA. Yahoo Finance Reporter Brooke DiPalma explains how the increase in gas prices and inflation are impacting consumers.
Video Transcript
- Well, gas prices, they keep climbing. The National average is $3.82 a gallon. That's according to AAA, up nearly $0.30 from just a month ago. Here with a closer look at what this means for consumer spending. Yahoo Finance's, Brooke DiPalma is digging into this for us. And Brooke, obviously, higher gas prices-- it's something that Americans, that consumers notice right away.
BROOKE DIPALMA: Yeah, notice right away. One the two biggest things that Americans notice is gas prices and food prices. So when gas prices rise, it ultimately then takes a toll on their spending power or really the way that they perceive their spending power in this economy.
And so really, an economist from S&P Global Market Intelligence told Yahoo Finance that there's about a 70% correlation between gas prices. And the way that consumers think of the US economy. And now, when you take into consideration where we're at right now with $3.82 per gallon, of course, that's lower than last year. But it still could have larger implications here.
And eToro, global market strategist really broke this down for Yahoo Finance, saying that when you take a recent low like $3.09, and you compare that to where we're at now with $3.82, $0.83, as of Monday, that's an extra annual cost of roughly $101 billion for us consumers in total.
Now that's based on an estimate that Americans' use roughly 375 million gallons of gas each day. But ultimately, bottom line here that means less money in Americans pockets to go out and spend on things like retail, back to school, entertainment, restaurants, and so on.
And so with these high prices-- while they're expected to sort of remain high, but not move higher, it'll be interesting to see the toll that this takes on Americans.
- Yeah, indeed. I mean, I even noticed an uptick recently when I was filling up at the pump. Not so much that it was like unbearable, obviously.
BROOKE DIPALMA: Right
- But I noticed that uptick. And that's not the only factor though, that is hitting consumers. So what else is on the horizon that could impact things further, Brooke?
BROOKE DIPALMA: Yeah. Well, right now, all Americans are sort of on watch for inflation, for higher costs, especially at the pump. But really young as well as-- young consumers, as well as low-income consumers, really on watch here-- when you think about the looming return of student loan payments, higher mortgage rates, higher interest rates, higher costs of groceries.
Again, we're getting a new read on CPI this Thursday. Now these are all things that Americans fear. And so when they think about these gas prices, it sort of leads to somewhat of a sour outlook for spending or rather S&P Global Market Intelligence analysts really telling us that it sours their outlook for what Americans can spend.
And when you think about back to school, higher costs, higher inflation, taking a toll on Americans' wallets on that disposable income. Well, US parents are all taking this into consideration. BNP Paribas also telling Yahoo Finance that excess savings that we saw back in 2021 is starting to run down, and they do expect that it might even be depleted by the end of the year.
And then, in addition to that, what we're seeing here with retail earnings out next week; what this ultimately means for retailers, we're seeing a lot of discounting there. Perhaps a different change of behavior, perhaps Americans buying less this back-to-school season. And while they won't be reflected next week in quarterly earnings, this is something that Wall Street's certainly looking out for as well.
- I mean, it will affect current quarter results when we talk about looking ahead to the next quarter. Right, Brooke? Thanks so much.
