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Gas Prices Bite Into Consumer Spending

By Joe Benton
ConsumerAffairs.com

July 17, 2007

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Gas prices are continuing to take a big bite out of consumer spending.

Nearly two in five (39.3%) American consumers said they reduced spending in June due to higher gas prices, according to a new Consumer Mind Reader national survey released by America's Research Group (ARG).

During the month, 21.7% of shoppers postponed a purchase of $599 or more compared with only 13.7% who said they delayed buying a big-ticket item in June 2006.

"The impact of gas prices on the American consumer's psyche is not going away," said C. Britt Beemer, Chairman of ARG. "The data reveal that retailers will experience difficult times and reluctant consumers for the important back-to-school and fall shopping periods."

The national average for regular self-serve gasoline is above $3 a gallon this week. Prices jumped almost a nickel in just two days, according to the latest ConsumerAffairs.com Gas Price Round-Up.

Prices are rising fastest in the Midwest because of outages at two major refineries in the region. Indications that one of the refineries will soon recover lost capacity are leading to a decline in gasoline futures, suggesting the price spike may be short-lived.

Higher gas prices have also had an impact on summer travel plans.

Some 28.3% of Americans say that they will not go on vacation this summer. Even though fewer people traveled during the week of Independence Day, only 36.9% shopped over July 4th, down from 40.5% last year.

Consumers also are noticing the pinch of higher prices at their supermarkets. Over 65% of shoppers say they have noticed significant price increases, up from only 53% earlier this spring.

"Other factors, such as consumer dissatisfaction with spring fashions and location of stores, help reduce shopping levels for the retail industry," Beemer said.

ARG data indicate that women have largely rejected the retro look even though retailers are discounting spring merchandise at 60% to 70% off, according to Beemer, and mall-based apparel retailers are struggling to attract female shoppers as malls continue to decline in popularity.

Only 16.6% of consumers shopped at mall stores this June, compared with 19.6% last year.

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