{"id":13719,"date":"2014-12-16T10:30:53","date_gmt":"2014-12-16T15:30:53","guid":{"rendered":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/short-reads\/%year%\/%monthnum%\/%day%\/gas-prices-consumer-sentiment\/"},"modified":"2024-04-14T03:20:31","modified_gmt":"2024-04-14T08:20:31","slug":"gas-prices-consumer-sentiment","status":"publish","type":"short-read","link":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/short-reads\/2014\/12\/16\/gas-prices-consumer-sentiment\/","title":{"rendered":"Do lower gasoline prices make for confident consumers?"},"content":{"rendered":"
\"gas<\/a><\/figure>\n\n

Gasoline prices have been dropping since midsummer, and consumers’ confidence about the economy has been on the rise. Could there be a connection?<\/p>\n\n

According to a new Pew Research Center report<\/a>, 70% of Americans now report hearing mostly good news about gas prices, up from just 15% in August. In truth, gas prices have been falling for months: As of Monday, the national average price of a gallon of self-serve regular was $2.554 — $1.15 less than in late June (representing a nearly one-third drop), according to the U.S. Energy Information Administration<\/a>. That’s the cheapest gas has been since October 2009.\u00a0Also, Brent crude oil has fallen more than $45 a barrel since June and is now\u00a0below $59 a barrel<\/a>\u00a0for the first time since May 2009.<\/p>\n\n

Meanwhile, the University of Michigan’s Index of Consumer Sentiment<\/a> stood at 88.8 in November, up 7 points since July and its highest reading since mid-2007. The preliminary December reading<\/a> is even higher, at 93.8, though that’s still subject to revision.<\/p>\n\n

We plotted the monthly consumer-sentiment index against the monthly average price of regular gas (adjusted for inflation) and found a moderately strong negative correlation — that is, consumer sentiment rose as pump prices fell. That aligns with previous research: For example, a 2012 paper<\/a> from two researchers at Loyola University Maryland and the University of Maryland Baltimore County not only found an inverse correlation between gas prices and consumer sentiment, but used\u00a0causality testing<\/a>\u00a0to conclude that price changes predicted sentiment changes and not the other way around.<\/p>\n\n

[T]<\/p>\n\n\n

Those attitudinal changes have real-world consequences, though not large ones. The authors of the JME paper, Paul Edelstein and Lutz Kilian, concentrated mainly on unexpected increases, rather than drops, in energy prices; they estimated that\u00a0a one-time, 1% increase in energy prices was associated with a 0.08% fall in total real consumption a year later, based on 1988-2006 data. But that was considerably less than the 0.30% decline seen in the 1970-1987 data; energy price shocks, they concluded, have less effect on the overall economy than they used to.<\/p>\n\n

Edelstein and Kilian also estimated that one year after an unexpected, permanent increase of 25 cents a gallon in the price of gas, a typical household would have reduced its expenditures by $17 a month, with most of the adjustment coming in the first six months after the price increase. Concluded the researchers: “It takes repeated surprise increases in gasoline prices to generate large effects on household consumption, but over time the effects will add up.”<\/p>","protected":false},"excerpt":{"rendered":"

Lower gas prices tend to improve consumer sentiment, but the actual impact on the overall economy probably is small. <\/p>\n","protected":false},"author":145,"featured_media":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"sub_headline":"","sub_title":"","_prc_public_revisions":[],"_ppp_expiration_hours":0,"_ppp_enabled":false,"ai_generated_summary":"","apple_news_api_created_at":"","apple_news_api_id":"","apple_news_api_modified_at":"","apple_news_api_revision":"","apple_news_api_share_url":"","apple_news_cover_media_provider":"image","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_cover_video_id":0,"apple_news_cover_video_url":"","apple_news_cover_embedwebvideo_url":"","apple_news_is_hidden":"","apple_news_is_paid":"","apple_news_is_preview":"","apple_news_is_sponsored":"","apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"relatedPosts":[],"_prc_fork_parent":0,"_prc_fork_status":"","_prc_active_fork":0,"datacite_doi":"","datacite_doi_citation":"","_prc_seo_qr_attachment_id":0,"spoken_article_player_enabled":true,"displayBylines":true,"footnotes":"","prc_watchers":[]},"categories":[232],"bylines":[842],"collection":[],"datasets":[],"_post_visibility":[],"formats":[467],"_fund_pool":[],"languages":[],"regions-countries":[515],"research-teams":[],"workflow-status":[],"class_list":["post-13719","short-read","type-short-read","status-publish","hentry","category-economic-conditions","bylines-drew-desilver","formats-short-read","regions-countries-united-states"],"label":"Short Read","post_parent":0,"word_count":407,"canonical_url":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/short-reads\/2014\/12\/16\/gas-prices-consumer-sentiment\/","art_direction":{"A1":{"id":25293,"rawUrl":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png","url":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png?w=564&h=317&crop=1","width":564,"height":317,"chartArt":false},"A2":{"id":25293,"rawUrl":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png","url":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png?w=268&h=151&crop=1","width":268,"height":151,"chartArt":false},"A3":{"id":25293,"rawUrl":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png","url":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png?w=194&h=110&crop=1","width":194,"height":110,"chartArt":false},"A4":{"id":25293,"rawUrl":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png","url":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png?w=268&h=151&crop=1","width":268,"height":151,"chartArt":false},"XL":{"id":25293,"rawUrl":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png","url":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png?w=640&h=363&crop=1","width":640,"height":363,"chartArt":false},"social":{"id":25293,"rawUrl":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png","url":"https:\/\/alpha.pewresearch.org\/pewresearch-org\/wp-content\/uploads\/sites\/20\/2014\/12\/FT_14.12.16_gas.png?w=640&h=363&crop=1","width":640,"height":363,"chartArt":false}},"_embeds":[],"watchers":[],"table_of_contents":[],"datacite_doi":"","prc_seo_data":{"title":"Do lower gas prices mean happier consumers?","description":"Lower gasoline prices tend to improve consumer sentiment, but spending less at the pump doesn't mean people will spend more at the mall.","og_title":"Do lower gasoline prices make for confident consumers?","og_description":"Lower gas prices tend to improve consumer sentiment, but the actual impact on the overall economy probably is small. 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