Report

Consumers only spending 25 percent of money saved from cheap gas

In the fourth quarter of 2014, the US economy grew by an annualized rate of 2.6 percent, while spending on personal consumption climbed by 4.3 percent. Consumer sentiment is up for the past six months, and this month is the highest it's been in 11 years. Employers are looking to add something like 200,000 additional jobs per month. The average price of a gallon of gasoline has come down by nearly 50 percent since last June, putting roughly $60 more in family coffers every month. In spite of the uplifting economic numbers and personal savings on the decline, consumers aren't plowing all of that gas-allowance money back into the economy.

Instead, says an article in the Wall Street Journal, consumers are "more often putting money aside for a rainy day or using it to pay down debt." Yes, you'll be excused for considering whether to press charges against these skinflints for treason against The American Dream, but this is what's happening in our country. Seems buyers feel the improving economy is still fresh enough to have a stink coming off of it, leading purchasers to exercise "persistent caution even when presented with an unexpected windfall," instead of exercising their plastic on spendy discretionary items.

A survey by Visa found that about half the saved money is put in savings, one quarter of it is being used to pay down debt, the last quarter is being applied to small purchases like groceries and fast food. Payment companies like Visa, MasterCard, and Discover say the low gas prices and lack of spending to make up for it have slowed their growth, and analysts say that it could stay that way until consumers sense that low gas prices are here to stay, which could take a few more months of the "party at the pump." But we're not going to fall for that trick again... are we?

Meanwhile, consumers are spending, they're just not spending every extra bit they've got. Deutsche Bank economist Torsten Slok might have the best perspective, saying, "We should be happy that consumers are paying down debt, and we should be happy that consumers are spending."

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