Lower gas prices lifting hopes for holiday sales

Experts predict cost of a gallon to reach $3.05 by end of year
Associated Press
Nov 28, 2013

No one begs Santa Claus for cheaper gasoline. Yet falling gas prices are shaping up as an unexpected gift for drivers — and for people on their holiday shopping lists.

The average price of gasoline has tumbled 49 cents from its peak this year to $3.29 a gallon, putting it on track for the lowest average since 2010, according to AAA. Because many Americans have had no pay raises, whatever money they're saving on gas has freed up a bit more for other purchases.

And history shows that when gas prices drop, consumers become more likely to splurge on dinners out. Impulse buys at the mall seem like less of a stretch. More people buy a gas-station gift card after fueling up.

Many retail analysts have forecast a ho-hum sales gain of around 2 percent this year; others predict an increase of up to 3.9 percent. But steadily cheaper gas could send holiday sales shooting above 5.4 percent, analysts say.

"Every little thing moves the needle at this point," said Carl Riccadonna, senior U.S. economist at Deutsche Bank. "The benefit at this time of the year certainly helps retailers, since it is not spread evenly throughout the year."

Tom Kloza, chief oil analyst at the Oil Information Service, foresees the average price drifting down, as it typically does this time of year, to as low as $3.05 by year's end.

For retailers, the best-case scenario would be for the national average to breach $3 a gallon, a psychological barrier that could help accelerate spending.

Cheaper gas could help build on the momentum of 2 million more Americans finding jobs this year. It might also help shore up consumers' fragile confidence in an economic recovery that's lumbered along for 4½ years.

Riccadonna estimates that breaking $3 gas would lead the average shopper to spend $47 more over the holidays. That figure would translate into $15 billion worth of extra shopping — possibly the difference between lukewarm and red-hot sales growth.

Prices briefly dipped below $3 in five states — Arkansas, Kansas, Missouri, Oklahoma and Texas — before rising above that threshold again.

Some service stations have been charging less than $3 around Tucson, Ariz., where Seth Nilson, a high school teacher, and his wife, Cristi, are enjoying more time at restaurants.

"We have definitely gone out to eat more lately," Nilson said. "She tends to cook less when gas prices are low."

Many consumers think of gas prices in 50-cent increments, said Britt Beemer, head of the consumer behavior consultant America's Research Group. Based on his firm's research, shoppers would spend more freely if gas settles below $3 or $2.50. They would likely step up purchases at grocery stores or spend $35 on a gift instead of the $25 they might have planned, Beemer said.

"A 10-cent drop doesn't really change the equation much," Beemer said.

Still, smaller declines in gas prices matter, too, even if they don't register as clearly with consumers.

Economists say lower prices disproportionately benefit lower- and middle-income consumers who must commute to work. Cheaper gas makes their trips more affordable and provides the equivalent of a tax refund that frees up spending money.

Given the still-sluggish economic recovery, many shoppers are expected to tilt toward practical gifts, like gas station gift cards, said Pam Goodfellow of Prosper Insights & Analytics, who polled consumers for the National Retail Federation.

Her survey found that the average gift card this year is expected to be worth $45.16, up from $43.75 a year ago — for a rough total of $1 billion more. Twelve percent of shoppers say they intend to buy gas station gift cards this year, compared with 9.3 percent in 2010.

The potential economic boost comes at a low point for consumer confidence. Confidence was battered by the partial government shutdown and the troubled launch of President Barack Obama's health care law, which led insurers to cancel coverage for millions.

Many major chain stores have acted aggressively to generate sales. Macy's will open on Thanksgiving night for the first time in its history, while Wal-Mart kicked off its usual Black Friday discounts a week before the holiday.

More consumers have not only been turning to Internet retailers like Amazon.com. They've also been browsing store websites ahead of time so they'll need to make fewer stops at the mall. But this year may bring a wrinkle: Falling gas prices tend to cause consumers to drive to brick-and-mortar stores more frequently, increasingly the likelihood that they'll expand their shopping lists.

"They become less surgical in their shopping behavior," said Bill Martin, executive vice president of retail analyst ShopperTrak. "That opens the door to more impulse buying."

Lower gas prices also tend to encourage a big-ticket purchase that a growing number of Americans make during the holidays: cars. Steep discounts and aggressive advertising helped sales increase 9 percent last December to more than 1.3 million, up from an 8.7 percent increase in 2011, according to Autodata Corp.

Market data tracked by Edmunds.com found that the share of SUVs, crossovers and trucks sold has ticked up a few percentage points to 18 percent or more in December, compared with as low as 14 percent in spring, when gas prices usually spike.

Edmunds.com chief economist Lacey Plache expects a slightly more modest increase this December. But she said auto dealers are adopting the same strategies as big box retailers eager to lure customers at year's end.

"We've seen the rise of the whole Black Friday phenomenon," Plache said. "There's this mentality that all the good deals are available in the latter part of the year."

Many consumers also know that lower gas prices this time of year are usually short-lived. So holiday-time spending typically provides a temporary lift, a short-lived chance to enjoy a new restaurant or buy another stocking stuffer.

"Now, if gas went to 99 cents a gallon," said Allena Portis, an accountant in the San Francisco area, "that would mean something."

Comments

Darwin's choice

I'm really happy for gas at $3.30 a gallon......NOT !!!!

It's time for the White House to do something for the people, instead of to the people.

Yes, I know that gas prices are not determined by the White House,however, in light of the incredibly silly/stupid laws that have been passed by them, helping the people would salve a lot of wounds....

Pterocarya frax...

"Yes, I know that gas prices are not determined by the White House,however, in light of the incredibly silly/stupid laws that have been passed by them, helping the people would salve a lot of wounds."

1. What would you have them do about gas prices?
2. The White House doesn't pass laws.
3. When gas prices reached $4.10/gallon in June, 2008 were you whining for the White House to do something about it?

Dr. Information

That 2008 price lasted for about a month and then fell drastically. I love the liberal left who only have that one month number to hang on. Prices under Bush were CHEAP for 99% of his 8 year term. Meanwhile, America has experienced the highest continual gas prices under Obama than any other president. Just the facts.

Darwin's choice

Typical azzhat reply! "I can't deny the problem, so I'll just make a stupid comment about you posting it".

Pfrax, you're a moron!

Happy Thanksgiving Obamabot!

Pterocarya frax...

Well actually Dr. Information, gas prices during the Bush administration stayed near or over $3/gallon from April, 2007 till it plummeted in fall of 08. Just the facts.

Good strong comeback with the namecalling Darwin! I asked a legitimate question. What would you have the White House do?

Dr. Information

Still no comparison to what we have had today with Obama.

The Big Dog's back

So dr. misinfo, Depression or gas prices a few cents cheaper?

Darwin's choice

I'll answer that with this:

Just what does the "White House" know about running a health care business? Don't bother trying to answer, we can see......

Pterocarya frax...

Even though you said in your first comment that you know the White House doesn't control gas prices, I am beginning to wonder if you do understand that.

You still can't provide an answer as to what you want them to do for us instead of to us, and know you seem to think the "White House" is trying to run a "health care business".

Contango

Re: "the White House doesn't control gas prices,"

BUT, numerous administrations have attempted to manipulate the price of oil through use of the SPR.

http://energy.gov/fe/services/pe...

Funny, during the Bush Admin. the Dems were all crying about Bush and Cheney as former oil men were manipulating the price.

But NOW when Mr. Obama is POTUS, the cry is that the POTUS has no power.

Hypocrites.

Pterocarya frax...

Certainly no more hypocritical than all the repubs that have it reversed, including Darwin's Choice.

Contango

Re: "hypocritical"

Good that you acknowledge that you're a hypocrite.

You wrote:

"the Bush administration stayed near or over $3/gallon from April, 2007 till it plummeted in fall of 08."

So what does this mean; you don't blame the Bush Admin?

Dr. Information

Bahaha. Contango. You just owned that poster. Don't expect a reply.

Pterocarya frax...

Bahaha Dr. Information. It is humorous that you see me as a hypocrite for that comment, when in reality it was a response to your hypocritical statement, and I quote:

"Prices under Bush were CHEAP for 99% of his 8 year term. Meanwhile, America has experienced the highest continual gas prices under Obama than any other president."

As you can see, by me pointing out your hypocrisy, Contango tried to twist it into me being a hypocrite to deflect away from how I had just owned his 2 little buddies...you and Darwin. Oh snap!

To paraphrase another of the hypocrites on here, go ahead and jump on your own petard.

Contango

Re: "Contango tried to twist it into me being a hypocrite,"

Well, let's see if that statement is true or not shall we?

Gonna answer my question Sport?

You wrote:

"the Bush administration stayed near or over $3/gallon from April, 2007 till it plummeted in fall of 08."

So what does this mean; you don't blame the Bush Admin?

Pterocarya frax...

To paraphrase your dear friend Hillary Clinton, What difference does it make what my answer to you is? You have already judged me guilty in your 9:01am comment:

"Good that you acknowledge that you're a hypocrite."

Darwin's choice

You're still an azzhat.....democrat.

Your house is on fire, and you're standing in the upstairs bedroom, about to be burned to death, yet you continue to yell about the neighbors trash cans in the street.....

How is that obamacare working, by the way, cheerleader??

Pterocarya frax...

I need your help Darwin. Help me understand why you constantly belittle liberals and call them names. Does it make you feel better, more powerful...superior in some way? I just can't wrap my head around it, so if you could share, I would really appreciate it.

Oh, and by the way I live in a one story home, and my neighbors are so far away I can't even see their garbage cans.

Darwin's choice

So, about that obamacare there dodger.....??

Pterocarya frax...

Hey you are off your game! I didn't get called a moron or azz... this time.

I don't use Obamacare because my employer provides a reasonably good plan. You might want to ask your hero John Boehner about it though. He signed up for it earlier this week.

Contango

Re: "my employer provides a reasonably good plan"

Typical liberal, I've got mine - scr*w you.

Enjoy it while ya got it Sport. Employers will start dumpin' 'em in late 2014.

Pterocarya frax...

Umm dude....it is most certainly NOT the liberals fighting against health coverage for everyone. Have you read any of my other comments on here lately? I have argued harder than anyone for universal health coverage.

Contango

Re: "I have argued harder than anyone for universal health coverage."

Defer & deflect.

Got some territory to cover before that, like employers dumping plans and throwing workers (like you) on the exchanges.

The Big Dog's back

I hope employers do drop it. Single Payer, YES!

grumpy

"I hope employers do drop it. Single Payer, YES!"

Yes I can see how the people will back the gov't taking total control of health care after seeing how well gov't is doing with just the insurance end of it. After 3 years of getting ready for it they have postponed 2 major parts of the bill (so far), given several hundred exemptions, can't get a website running well enough (after 3 years) to even allow paying for the policies to happen online, I could go on but am sure you can see how well the gov't is doing running just part of healthcare and you think the people will be anxious to give more over to the gov't to run (into the crapper)? Only a Piddle Puppy and other kool-aide swillers would be so deluded to think like that.

Contango

Pterocarya fraxinifolia wrote:

"Certainly no more hypocritical than all the repubs that have it reversed,"

Read what you wrote.

You yourself acknowledged your hypocrisy Sport.

Pterocarya frax...

That wouldn't exactly hold up in court....but since you have deemed yourself judge, jury, and executioner...I guess it is good enough.

Contango

Re: "That wouldn't exactly hold up in court...."

Defer & deflect.

Let's make this easy:

Did the Bush Admin. manipulate gas prices? Yes or no?

Pterocarya frax...

Golly....whenever a liberal utters the word bush, even if they are talking about shrubbery, all the Republicans start screaming about living in the past. Now you just can't let it go. Move on.

Contango

Re: "whenever a liberal utters the word bush,"

Defer & deflect.

Don't care about Pres. Bush - didn't vote for him.

You stated that the WH doesn't control gas prices.

Did the Bush Admin. manipulate gas prices? Yes or no?

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