Gas Prices Affecting Consumer Spending

In September of 2008 gas prices were down 13%, and since then gas prices have continued to go down. However, the gas prices were so high in July and August, that consumers had very little income to spend on goods, and the economy continued to slow. Consumers no longer had the available income to spend on foreign imports, like clothes, watches, and electronics. As gas prices dropped, retail sales increased. Sales for clothing went up 3.3% after August. Consumers now have more disposable income to spend on goods again. This means that foreign imports will see an increased sales and growth, as long as gas prices continue to drop and stay low. Because the U.S. economy is so large, when the average American consumers can no longer afford to buy foreign imports, it affects global retailing.

Since, the drop in gas prices women clothing is one of the sectors that is doing well. This is because consumers have more money to spend, and designers have changed styles to adjust to the hard economic times and added more grays and duller tones to their respective fall and winter lines. Chain retailers like Target and J.C. Penny are experiencing growth in sales due to the drop in gas prices. Consumer electronics sales also were boosted with the relatively sudden drop in gas prices.

It is clear that when gas prices are so high that consumers have to cut spending, global retailing will take a hit. This would also be the case if any other necessary amenity such as, natural gas (heating), electricity, or water were to see severe spikes in prices. However, gas prices are low again, and consumers have more cash to spend on luxury items. This could not have happened at a better time seeing that the holidays (Christmas, Chanukah, and Kwanza) are around the corner. Retailers expect huge increases from holiday sales in 2007.