Retail sales jumped 0.1% in April and while not great, it beats the 0.5% decline in March! Moreover, it shows that consumers are spending despite the sequester and the payroll tax increase. And a key reason was the huge 3.5% decline in gasoline prices, the largest monthly drop in a decade. If sustained for a year, lower gas prices would save consumers $15 billion/year and boost GDP by 0.1% singlehandedly.
Tag Archives: Gas prices
Gas Up, GDP Down
Every penny rise in gas costs the economy $1.8 billion/yr. With gas at $3.65, 40 cents more than a year ago, that’s a $72 billion tax. If prices rise another 40 cents, bringing the price within six cents of the all-time high of $4.11 in 7/08, it would trim 1% off GDP. With summer driving season nearing, along with increasing geopolitical risk, costly EPA summer reformulation and refinery maintenance, I bet prices keep climbing.