U.S. households are now spending up to $5,000 on gasoline, according to a new study, a staggering increase from a year ago due to soaring prices.
new analyze Research from Yardeni Research shows that rising fuel prices are increasingly burdening American households. By comparison, just a year ago, the average American spent $2,800 on gasoline. That number also climbed rapidly starting in March, when Yardeni estimated the annual cost of gasoline for most households was about $3,800.
“It’s no wonder consumer confidence is so subdued,” Yardney said in a note. “Surprisingly, retail sales were surprisingly strong during April and May.”
Average price of a gallon gas Nationally, the price was $4.56 on Wednesday, up from $3.04 a year ago, according to AAA. It marked the highest gasoline prices on record; before the recent inflation spike, the national oil price had not exceeded $4 a gallon since 2008. Some Americans pay more for fuel: in California, for example, gas prices are as high as $7 a gallon.
Sky-high gas prices stem from faster-than-expected economic recovery Pandemiccausing the hottest inflation For decades, thanks to strong consumer demand, an influx of government stimulus and disruptions to global supply chains.
The Labor Department reported earlier this month that consumer prices surged 8.3% in April to near a 40-year high and much faster than economists had expected. It underscores how strong inflationary pressures remain in the economy, despite hopes that consumer prices may peak soon.
Rising inflation is eroding U.S. workers’ strong wage gains in recent months: According to the Labor Department, real average hourly earnings fell 0.1% in April from the previous month, as rising inflation eroded 0.3% total wage growth. On a yearly basis, real earnings in April actually fell 2.6%.
Still, Yardney noted that consumers have amassed massive savings — in part because of trillions of dollars in federal stimulus — and are charging ever higher fees on credit cards.
“When we’re happy, we spend money,” the note reads. “When we’re depressed, we spend more.”
Recent government data appears to support Yardeni’s thesis: The Commerce Department reported earlier this week that retail sales, a measure of consumer spending on everyday items such as cars, food and gasoline, rose 0.9% in April from a month earlier. .
So-called core retail sales, which exclude autos, gasoline, building materials and food services, are most closely related to the consumer spending side of U.S. gross domestic product and rose 1% in April.
Still, with gasoline prices soaring in recent weeks, analysts have warned that inflation could climb in May and higher gas station prices could weigh on consumer spending.
“While U.S. consumers continued to spend more at retail stores in April as lower gasoline prices helped drive discretionary spending,” said Tuan Nguyen, U.S. economist at RSM. “But it won’t last long, as May Gasoline prices are at record highs.”