Gas price paradox – we’re saving at the pump, but not spending the cash
The start of 2015 was expected to usher in a spending rebound, boosted by lower prices at the pump, but so far, purchases of goods and services have been lackluster at best.
The Obama Administration predicted U.S. households would save more than $700 this year, compared to last, due to falling gasoline prices. However, recent federal numbers would suggest that drivers' extra dough is not going back into the economy. Consumer spending barely ticked up in February. It declined a month prior.
"We see that the economy as a whole seems to be a little more sluggish this first quarter, and it's less than what people had anticipated," said Maury Randall, chairman of the finance department at Rider University.
According to Randall, the nasty 2014-2015 winter kept people indoors, therefore limiting their spending at retail establishments. And while they may have been saving on gas in the car, more money was going out the door to pay for gas in order to heat their homes.
According to GasBuddy.com, a gallon of regular gasoline in New Jersey is about $1.20 cheaper than a year ago. The site reveals several gas stations with prices under $2 per gallon.
Steven Pressman, a professor of economics and finance at Monmouth University, said the extra $10-$15 saved by households each month may be going to other costs that don't register in the sales or GDP columns.
"You've got lots of households that are in deep debt," he said. "You've got credit card debt that hasn't been paid down a great deal. You've got college loans which are rising sharply."
In the latest analysis from Zillow, nearly 17 percent of mortgaged homes were considered "underwater," meaning the owners owed more than their homes are worth.
|Lowest Gas Prices in New Jersey|
|New Jersey Gas Prices provided by GasBuddy.com|