By Brenda Acuna |Staff Writer|
The Commerce Department announced Sep. 28 that U.S. consumer spending has reached its highest mark in six months, thanks in large part to higher gas prices.
According to the government report, consumer spending rose from 0.5 percent in August from July and had risen 0.4 percent in July, making it the largest jump since February.
“The U.S. personal income and spending data for August are worse than the headline figures suggest and indicate that subdued jobs growth is hitting incomes,” said Paul Dales, a senior economist with Capital Economics. The increase, “was largely due to extra spending caused by the surge in gasoline prices.”
Despite the increase in consumer spending, Americans’ personal income has only grown 0.1 percent. After tax deductions and inflation, income has actually decreased 0.3 percent; the poorest performance since last November, according to reports from DailyFinance.com.
High unemployment, in conjunction with weak wage growth, has hindered Americans from saving money.
Economic researchers believe that Americans are rummaging through their savings accounts to make ends meet.
A report from the Consumer Department shows that savings rates fell to 3.7 percent of after-tax income after reaching 4.1 percent the month before.
Consumer spending accounts for nearly 70 percent of economic activity. Although Americans are spending more due to higher gas prices, this does not necessarily imply that it is improving the state of the economy.
Last month, the U.S. Census Bureau reported that consumers spent 0.9 percent more in retail businesses in August from July.
However, the report shows that retail rose only 0.1 percent once the impact of gas prices is excluded.
The government report also showed that Americans reduced their consumption of electronics and clothing.
Economists report that Americans are reluctant to spend as a result of higher gas prices. “Consumers were not willing to spend much at the mall since they are feeling the pump price pinch,” said Chris Christopher, an economist at IHS Global Insight.
The hike in gas price is also affecting college students as they commute regularly to campus. “All my money is going to gas,” said incoming CSUSB freshman Misty Landeros. “It’s crazy! I paid $4.29 per gallon today. It’s making me broke!”
On Oct. 3, the average price of a gallon of regular gas in the San Bernardino-Riverside area was $4.20, up from $4.16 a week earlier, according to AAA’s Daily Fuel Gauge Report. The average cost of gas was $3.82 exactly one year ago.
As of Oct. 4, gas prices are reaching an all-time high. “This is the first time in 12 years that the price of gasoline rises 20 cents in just one day,” said Sanka Wickramaratnc, a manager at the local AmPm on Palm Ave. in San Bernardino. “On Monday gas was $3.99. Wednesday, it rose to $4.21 and today [Thursday] it is $4.41 for regular gas,” continued Wickramaratnc.
The rapid increase in gas prices is due in large part to a supply issue fueled by refinery and pipeline outages. Gas prices are also high across America with an average of $3.78 a gallon. California is the most affected as inventories are lower than they have been in more than 10 years.
Analysts had reported in 2011 that gas prices would reach a record high in 2012. The highest recorded average price of gas was $4.614 in June 2008.
On Oct. 4 the highest price recorded was $4.69, making it the highest average in California to date. Prices are expected to increase within the coming weeks.