Economists and government officials have tried to figure out or guess the point at which new, high gas prices will undermine economic growth and consumer spending. There is no single answer. For people who make very little and drive some, the trouble is already acute. For middle-class workers who have long commutes, the problem is severe as well. But what is the overall effect across the entire consumer economy? A poll from Gallup says it is when gas prices reach $5.30. That should calm some economists who believe the number is much closer to $4. The calm is not entirely justified, though. Gas prices have already prompted changes in behavior for many Americans.
Gallup reports that:
Americans on average say gas prices of $5.30 to $5.35 per gallon are the tipping point that would make them cut back on spending in other areas or make significant changes in the way they live their lives.
Average is the operative word because the effect on the poor and people who drive long distances already has started. Gallup reports:
The responses varied widely, with 14% to 17% of Americans saying a price of less than $4 per gallon would be high enough to cause them to change their lifestyle or cut back on spending elsewhere. Another 28% each say a price point in the $4 range would cause these changes. The overall average “tipping point” price of roughly $5.30, however, suggests there is room for a considerably greater increase in gas prices before Americans say prices will begin to have widespread, serious consequences on their spending and lifestyle patterns.
The still-unanswered questions are how quickly high gas prices could cause a faltering of GDP improvement and gains in employment. Those questions may not be answered until GDP data for the first quarter are released in April and unemployment numbers for March and April come out. Current job numbers show the economy continues to add 200,000 workers a month. But gas prices have only risen to current levels in the past 90 days. The ripples have only begun to reach many Americans in the past few weeks.
There is reason to believe that gas prices already have put brakes on the consumer spending of many Americans. There also is reason to believe that those brakes will not push the U.S. economy toward another slowdown.
Methodology: Results for the questions included in this Gallup poll analysis are based on telephone interviews conducted March 5 to 6, 2012, on the Gallup Daily tracking survey, with random samples of approximately 500 adults each, aged 18 and older, living in all 50 U.S. states and the District of Columbia.
Douglas A. McIntyre