Lower Price at Pump to Prime Recovery
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Economist are predicting that the recent fall in gasoline prices will help support the economic recovery in the U.S. High gasoline prices act like a tax on consumers and can curb spending habits. Lower prices on the other hand mean more cash in consumer’s pockets which ultimately fuels spending.
"The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items," said Paul Dales, senior U.S. economist at Capital Economics.
The average national price for a gallon of gas was $3.54 Wednesday, down 40c since peaking in April. The decline in gas prices, while positive, might not be enough to offset a potential decline in consumer confidence, which many analysts say is likely to fall in June. The fear is that improved consumer sentiment due to lower fuel prices could be wiped out by the larger macro dangers of slowing global growth and the crisis in Europe, which ironically is exactly what is causing gasoline prices to fall.
"The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items," said Paul Dales, senior U.S. economist at Capital Economics.
The average national price for a gallon of gas was $3.54 Wednesday, down 40c since peaking in April. The decline in gas prices, while positive, might not be enough to offset a potential decline in consumer confidence, which many analysts say is likely to fall in June. The fear is that improved consumer sentiment due to lower fuel prices could be wiped out by the larger macro dangers of slowing global growth and the crisis in Europe, which ironically is exactly what is causing gasoline prices to fall.
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