High gas prices hurt economy, but low gas prices don't help much either

A new survey by Bankrate.com has found that 80% of Americans have not increased their discretionary spending despite gasoline price declines in the first half of 2013. Last year, elevated gas prices led 59% of Americans to decrease their non-essential spending. In 2011, when gas prices were also at elevated levels, 63% of Americans cut back.

Between late February and late April 2013, gas prices in many parts of the U.S. dropped by 30 cents per gallon (nearly seven percent). Currently, gas costs about 25 cents per gallon less than it did one year ago. But as Greg McBride, CFA (Bankrate.com's senior financial analyst) explains, "While rising gasoline prices are a clear headwind to the economy, recent price declines have provided little oomph to the economic recovery."

Only 17% of Americans have increased their non-essential spending as a result of the recent drop in gas prices. The reading is consistent across age, education and income levels.

Bankrate.com's Financial Security Index slipped for a second consecutive month in May, to 100.2, but continues to show slight improvement versus this time last year. Any reading above 100 indicates improved financial security compared to 12 months ago. This is the third month in a row – but only the fifth in the 30 months since its inception – that the Index has registered over 100.

Americans are feeling better now than in May 2012 in four of the Index's five components (job security, debt, net worth and overall financial situation). The other component, savings, remains in negative territory. Interestingly, higher-income households (annual income of $75,000 and up) are the only group feeling more comfortable with their savings versus last year but are feeling slightly negative about their job security in that same time period.

The survey was conducted by Princeton Survey Research Associates International (PSRAI) and can be seen in its entirety here:

http://www.bankrate.com/finance/consumer-index/financial-security-charts-0513.aspx

PSRAI obtained telephone interviews with a nationally representative sample of 1,001 adults living in the continental United States. Interviews were conducted by landline (501) and cell phone (500, including 235 without a landline phone) in English by Princeton Data Source from May 2-5, 2013. Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error for the complete set of weighted data is plus or minus 3.6 percentage points.

 

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