Cheaper gasoline boosts consumer spending

November 14, 2014 03:54 AM

Americans spent a record amount of $444.5 billion online and at stores in October. For the first time since July 2010 they devoted less than one-in-10 dollars to spending at gasoline stations. Receipts fell by 1.5% weighing total sales by the most among 13 categories. According to AAA, the cost per gallon of unleaded fuel during the month fell to $3.15 from $3.38 in September. Four years ago when Americans last devoted less than 10% of total spending to gasoline stations, the cost of gasoline was just $2.73. The current cost according to AAA is $2.92, which bodes well for holiday sales.

Lower gasoline prices appear to have inspired consumers to spend more elsewhere. Auto sales rose by 0.5% last month adding 0.1% to the overall increase of 0.3% at the headline level. Meanwhile, spending on dining out added the same amount, bolstering evidence that consumers are treating falling gasoline prices like a tax cut. The only other component to witness a drop in sales was the electronics sector, which suffered from the return to normal after the September launch of the new iPhone. Elsewhere, consumers appeared happy to spend, reflecting broader employment gains above 200,000 for the last nine months. Online spending accelerated at its fastest pace since March. 

The spending measure used to compute consumption for the GDP report was equally robust during October. Spending outside of gasoline stations, food services, autos and building materials rose by 0.5%, while the previously reported decline for September was upgraded to unchanged on the prior month. 

Gasoline station receipts fell into the single digits as a percentage of total consumption

About the Author

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.