Dive Brief:
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With a decline in gas prices that began last year holding on, American households are beginning to spend the windfall on other things, according to new research from JPMorgan Chase Institute. Gas savings for U.S. households in 2015 will be an average of $700.
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Each American will spend about 80% of their gas savings on other things this year. Some 20% of that is going to restaurants, but department stores, entertainment, and electronics and appliances are seeing gains as well, according to the report.
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For this research, JPMorgan Chase Institute used a starting point of 57 million anonymous customers to look at samples of 25 million regular debit and credit card holders and 1 million core Chase customers. Gains in discretionary spending from lower gas prices disproportionately accrue to low-income individuals, young people, and people in the Midwest and South, where they tend to spend more on gas, according to the report.
Dive Insight:
When fuel prices first started falling, Americans seemed to be pocketing the savings or perhaps assuming that the lower prices were short-lived. After a year of declines, though, Americans are apparently finally getting used to spending less on gas, and are putting more money into spending other things.
That’s good news for retailers heading into the holidays. With forces still having a dampening effect on spending — wages for lower- and middle-income folks aren’t moving up much at all and fits in the global economy are giving many jitters — gas price declines are a bright spot.
Of course, if pump prices should rebound — and some experts believe they will — that extra spending power will also disappear.
“[C]ontrary to general perception, people appear to be spending rather than saving their gains at the pump,” the report reads. “Given that gas spending represents less than 5% of consumer spending, these impacts are small in absolute dollar terms and easily overshadowed by other economic forces. Nonetheless this boost to other categories of consumer spending could be here to stay if gas prices remain low as predicted.”
