The recent spike in gasoline prices seems correlated with reduced spending. Walmart said their shopper is gas-price sensitive, and they make fewer trips to the store, and thus fewer impulse purchases and sales are down a bit. Starbucks is taking a hit attributed, by them, to higher gas prices. I read the high end fast food shopper will downgrade to McDonalds, while the McDonalds customer will stop eating out.
I get your point Rich, and I wonder why people are reacting stronger to this recent rise. Perhaps the magnitude is too large, for people already living on the edge. 75% of Americans say the high price of gas is a hardship. Perhaps the size of the latest jump is psychologically difficult.
Are people avoiding Starbucks bec. they are stretched too thin with this latest jump, or because they’re darn sure not going to spend money on overpriced coffee when gas costs so much? (Actual hardship or psychological)
I expect to see a drop in spending due to MEW slowing, but this would be gradual. This quick impact is due to gas going over $70/barrel.
Pretty soon, the high commodity prices will shop up in more expensive goods. Carpets, food, everything made with oil and transported will be more expensive in a few months. So the higher price will slow consumer spending. Why do we need higher interest rates to curb demand? High oil, in and of itself, is doing the job rather quickly. Higher commodity prices will show up in products make with copper, lead, platinum.
