Cheaper Gas Prices Lead to Increased Restaurant and Retail Spending
Lower gas prices have allowed consumers to spend more at restaurants and retail establishments, according to a JPMorgan Chase Institute study. Specifically, consumers spent 19% of their savings on restaurants, 16% on retail, 13% on online retail and 11% on groceries. The other 42% was saved or spent on items such as vehicles.
Gas prices have decreased 25% over the past year, which means middle income households are spending $477 less at the pump–the equivalent of about half of the average month’s rent or mortgage payment.
The Consumer Response to a Year of Low Gas Prices study, which sampled one million Chase customers in 23 states, found this led to consumers spending 14 cents less on transit and an increased spending on other goods at the gas station. In fact, 24% of their savings was spent at gas stations.
“The drop in gas spending is significant for consumers – it is the equivalent to more than a one percent increase in annual income for low and middle income households,” said Diana Farrell, President and CEO, JPMorgan Chase Institute. “This savings at the pump benefited restaurants and retailers and contributed to changes in consumers’ transportation choices that we haven’t seen in five years. People are driving more and using transit less.”
The drop in prices affected people differently, depending on their geographic location or economic status. Those who earn less than $30,000 benefited the most, as their $332 in gas savings is the equivalent of a 1.4% increase in discretionary income. Households in the West and Northeast were impacted the least. In fact, 28% of households, primarily in California, increased their gas spending.