Lower Gas Prices Haven't Boosted The Economy As Expected

Unless you've been in coma over the last year or just returned from being off-planet, then you know gas prices plummeted and, even though they are creeping back up, are about $1 a gallon cheaper than this time last year.

One would think that with fuel prices in general being a lot lower than they have been that people would be spending some of the money they've saved because of lower fuel prices on things they've needed (or wanted) but had to put off when prices were higher. But that hasn't been the case.

...40% of Americans are using the money they’ve saved from lower gas prices to pay for necessities like groceries and rent payments.

Fewer than 20% of people are banking that extra cash, and fewer than 5% are investing it. Bankrate found that only about one in seven of people are spending that extra money on discretionary purchases like dinner out or a vacation. “Household budgets remain very tight,” McBride says. “People don’t have a lot of extra money to throw around, and that’s why we’ve had this slow growth.”

For months, Americans have displayed a reluctance to loosen their purse strings even as gas prices fell. The recent increase in prices at the pump has only confirmed what many people suspected — that those super-low prices weren’t here to stay. More importantly, paying for necessities or socking away those dollars isn’t helping the economy the way economists had hoped.

That wages haven't grown might also be a part of the problem.

While the government reports the Consumer Price Index hasn't changed all that much over the past 6 years or so, it must be remembered that things like the cost of food and fuel aren't part of the CPI calculations. Though the inflation rate has appeared to be low, the actual rate was quite high once those two commodities were figured in to inflation. Even though gas prices have fallen, the cost of food has not, some of that caused by the continuing drought in California.

The lower fuel prices have certainly helped families stretch their dollars a little farther, it hasn't been a boon to the economy. As fuel prices rise again, most families will go back into full austerity mode and rein in their slightly higher spending once again.