Consumers High on Low Gas Prices
Optimism surges but consumers split on long-term price outlook
ALEXANDRIA, Va. -- After more than 100 consecutive days of gasoline price declines, consumers are truly taking notice.
Consumer sentiment increased to levels not seen since January 2004, jumping from 93.6 in December 2014 to 98.2 in January, according to preliminary figures from The University of Michigan consumer sentiment index. This represents a nearly 5% increase from December and nearly 21% jump year over year.
"Gains in employment and incomes as well as declines in gas prices were cited by record numbers of consumers," said Richard Curtin, chief economist of Surveys of Consumers at the University of Michigan. "More consumers spontaneously cited increases in their household incomes in early January than any time in the past decade, and more households reported unprompted references to favorable employment prospects as well as lower prices than at any other time in the more than the half-century history of the surveys."
The survey's current economic conditions index rose to 108.3 in January, a nearly 12% increase from the year prior and the highest level since January 2007.
The University of Michigan results were echoed in the latest National Association of Convenience Stores (NACS) survey of gas consumer sentiment, where, for the first time since 2012, most consumers said they were optimistic about the economy. According to the survey, 57% said they were optimistic, including 65% of 18-to-34-year-olds.
Also, 31% of consumers expect gas prices to continue to decline over the next month, which is the largest percentage in the history of the survey. But the same share of consumers anticipate a price increase during the next month.
Northeasterners are slightly more optimistic about a price decline (37% vs. 21% who expect a price increase), while Midwesterners are less optimistic, with only 22% expecting a price decline and 43% anticipating an increase.
As to whether lower gas prices will encourage more driving, 24% of consumers said they would drive more this month than last. This compares to only 19% in the previous three months' surveys. At the same time, just 16% said they plan to spend more money overall, not including gasoline purchases.
"Consumers generally pay down expenses in January after holiday spending so it's not surprising that they may not shop more as gas prices fall," said Jeff Lenard, vice president of strategic initiatives at NACS. "But if consumers do, in fact, travel more this month, it would be a significant departure from previous years when January travel tended to fall off after the holidays and as winter weather keeps people indoors more."
Penn, Schoen and Berland Associates LLC conducts the monthly NACS gas consumer sentiment survey. For its most recent iteration, the firm surveyed 1,108 gas consumers between Jan. 6 and 8, 2015.
Click here for a summary of the results.