Low Gas Prices Putting More Money in Consumer Pockets

Middle-income consumers paid 'significantly' less in gas last year, says Diana Farrell, president and CEO of the JPMorgan Chase Institute.
By Scott Gamm ,

Middle-income households spent $477 less on gasoline in 2015, thanks to the 25% year-over-year slump in gas prices, according to a new report.

"It's quite significant," said Diana Farrell, president and CEO of the JPMorgan Chase Institute, which authored the study that tapped into a sample of one million Chase customers in 23 states. "For most households, it's 1% of their income, and that's a pretty significant raise. For the lower income households [this figure] represents 1.4% more disposable income."

The $477 figure amounts to half of the average mortgage or rent payment for middle-income consumers, according to the report by the JPMorgan Chase unit.

Consumers spent this money "on more gas, which reverses a five-year trend of people spending less on gas and driving less," Farrell said.

Aside from driving more, households spent $214, or 45%, of the drop in gas spending on non-gas goods and services, largely restaurants and retail. This is in line with a recent consumer trend showing consumers raising their spending on experiences rather than tangible goods, according to Farrell.

Farrell said most people expect gas prices to remain low. The national average for a gallon of gas stood at $2.23, according to AAA, compared to $2.38 one month ago and $2.77 one year ago. Oil prices are trading near $46 a barrel, its lowest level in two months, but nearly double its 2016 low of $26.21 a barrel reached on Feb. 11.

While the aforementioned report examined 2015 spending, Farrell said the first quarter of 2016 was a disappointment. That's in line with retail sales data released by the U.S. Census Bureau, which showed declines in consumer spending in January, February and March, followed by a 1.3% month-over-month rebound in April.

On Friday the government reported a 0.6% gain in retail sales for June. Despite a slowdown in auto sales, the figure topped economists' expectations for a 0.1% increase.

Loading ...