Falling Gas Prices Fuel Consumer Spending
Study of Credit and Debit Card Usage Tracks Increased Spending
Americans actually are spending much of the money they are saving at the pump, vs. saving it, according to a new study from the JPMorgan Chase Institute.
Average U.S. gasoline prices fell 45 percent from Winter 2014 to Spring 2015, and in some surveys, consumers had reported that they were using the money saved to pay down debt or grow their savings.
By examining spending patterns in roughly 25 million Chase debit and credit card accounts, the JPMorgan Chase Institute found that Americans spent between 72 and 89 cents of every dollar saved on gas. About 18 percent of each dollar went to eating out, 10 percent to groceries and 7 percent each to shopping and entertainment.
“Consumers report that they are using their gains at the pump to pay down debts and save. Our data show they are spending most of them," the study said.
Sara Lester, 25, from Virginia, estimates she has saved about $600 at the pump this year, money she has used to buy groceries and help with the costs of moving into a new apartment.
Lester says she noticed a difference starting in late 2013 when gas prices began their slide and she switched to driving a Toyota Prius. Lester maximized her savings by always getting gas at a supermarket near her apartment where she can earn extra discounts by using her grocery store rewards card.
“Things have been easier since I have saved money on gas," Lester said.
Drivers in the South and Midwest, who typically spend more of their income on gas than people on the East or West coast, have saved the most, according to the study. For low-income people and drivers aged 18-29, the savings amounted to as much as 1.6 percent of their monthly income.
Some major retailers have also indicated that consumers using gas savings have boosted sales. “Clearly (we) benefited from customers having more spending power due to lower gas prices in most of our large markets," said Doug McMillon, president and chief executive officer of Wal-Mart Stores, Inc., on a conference call with analysts in February.
Roughly two-thirds of all Americans spent less on gas in early 2015 than they did when prices were higher in late 2013 and early 2014, the study found. Those savings are expected to continue, with the average American household saving $700 in 2015, according to U.S. government projections.
Elizabeth Dilts is a journalist at Reuters news agency in New York. She has also written for The Atlantic and The American Lawyer, among other publications.