Americans Will Take To The Roads Once More

Americans do not care much about the price of gas, at least for now. Ninety million people will take to the roads between December 23 and January 2. The AAA measures people who plan to travel more than 50 miles from home. The figure is up 3% from last year, despite gasoline prices which currently average $3 a gallon.

The AAA news is another in the signs that consumers are once again in a mood to spend money. Most information from the retail sector shows that retail activity is better than it has been in three years. Economists attribute some of this to the law passed by Congress to extend tax cuts. Others say that Americans have been so cheap for so long that they have decided now is the time to be generous.

Government data has shown recently that Americans have dropped theamount of credit they have outstanding. The reason for this is probably that people have begun to “deleverage” after using home equity to fuel their consumer spending. The housing market collapse and unemployment ended those habits. But, the moratorium may have lasted only these last two years.

It is odd that Americans are willing to travel more, which means they will spend more on gas. Additional AAA data shows that many people now spend  as much as 7% of their household budgets on gas. That figure may rise, but it has not undermined travel yet.

Consumer optimism is on the rise.  Whether it lasts into next year is impossible to determine. There is still a chance that a further increase in gas could be one of the things that cripple in economic expansion as it did in mid-2008 when gas hit $4.

People may feel better about their economic prospects, but gas prices are one fixed cost it is impossible for most people to avoid.

Douglas A. McIntyre