Barron’s picks up “Energy Finally Dragging Down Spending”



Barron’s picked up yesterday’s Energy Finally Dragging Down Spending:

THE RESILIENCY OF CONSUMER SPENDING in the face of high energy prices has surprised many observers. The modest impact high energy prices has had on spending has been mustered by some economists as proof of the resiliency of the economy. If $65-a-barrel oil doesn’t hurt spending, than this must be a robust economy, they argued.

Unfortunately, that issue has now been resolved — to the downside. With Target’s announcement last week and Wal-Mart’s dour guidance Tuesday, there can be little doubt that high energy prices are impacting consumer spending.

Up until now, the negative economic drag has been hidden by the bifurcated nature of the U.S. consumer. High gas prices may be a mere annoyance to the high-end shopper (Tiffany, Neiman Marcus, Coach), but to consumers who frequent the discounters (Costco, BJs, Wal-Mart, Target) the added energy expense significantly crimps spending. Budget-minded shoppers simply cannot shrug off $3-a-gallon gasoline.

I thought that entire line of thougth has been terribly obvious, and have been mentionin g it for the better part of a year now — but apparently, many people have been claiming that there’s no inflation and Oil doesn’t matter — Until it does, which is approximately now.

High Oil Prices Hurt Consumer Spending
WEDNESDAY, AUGUST 17, 2005 11:56 a.m. EDT

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  1. Blackwood commented on Aug 17

    >a mere annoyance to the high-end shopper

    For at least the ones I know, it IS annoying them. When you own 5 different homes and have to pay all their energy bills each month, it adds up.

    Not that they’d ever dream of selling off the least used property or two (even though this is the best time to cash out). But the bills are at gripe level.

  2. nate commented on Aug 18

    do you think oil and gas prices will have an impact on IRA and 401(K) contributions?

  3. SoCal Chris (formerly chris) commented on Aug 19

    “do you think oil and gas prices will have an impact on IRA and 401(K) contributions?”

    i think stock market performance and real estate is the big near-term factor there.

    maybe if high gas prices hit consumer confidence, a higher savings rate will result …

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