HomeNational NewsRising gas prices spark concerns over inflation's impact on consumers

Rising gas prices spark concerns over inflation’s impact on consumers

Published on

As the previous year ended, inflation seemed to be decreasing significantly, consumer confidence was on the rise, and the wages of many Americans were beginning to exceed the rate of price increases. However, the trends of early 2024 have been less clear.

For several months now, the annual inflation rate has consistently been above 3%, recent retail sales figures have been weaker than expected, and wholesale prices have unexpectedly surged. Despite this, the financial markets have remained stable, with investors optimistic that the Federal Reserve will start to reduce interest rates later this year, even if it’s a bit delayed. This is seen as a hopeful indicator that the Federal Reserve’s long battle against inflation might be nearing a successful conclusion.

However, we’re not quite there yet. It’s likely that the Federal Reserve will emphasize this point in its next meeting, where it will decide its future actions. In the meantime, consumers are still expressing concerns over high prices on items ranging from homes to hamburgers. Economists suggest that the recent data show trends and possible future directions. They note that about two-thirds of the recent rise in wholesale inflation is due to increased prices of goods, primarily because of higher energy costs. This includes a 6.8% increase in wholesale gasoline prices last month.

Read also: Historic settlement: California allocates $2 billion for equal education amid pandemic fallout

This rise in gasoline prices is generally seen as a typical seasonal pattern, with demand increasing as daylight saving time begins and the summer driving season approaches. Currently, the average price for a gallon of regular gas is approaching $3.44, which is an increase of 4 cents from the previous week, and this is before the more expensive summer-blend gasoline hits the market, as reported by AAA.

Nevertheless, the energy sector faces ongoing uncertainties, including geopolitical tensions such as recent attacks by Ukraine on Russian refineries. Just this Thursday, the International Energy Agency updated its yearly forecast, anticipating a slight shortfall in supply that may push energy prices higher in the next few months. According to some analysts, rising oil prices could impact the costs of transporting goods, which might lead to higher retail prices for consumers.

“This could be a bit of a wild card,” said Ted Rossman, senior industry analyst at Bankrate. “If it all of a sudden costs 5 or 10% more to move goods around, that could contribute to inflation.”

Currently, gas prices are slightly below what they were a year ago, which has led some analysts to remain optimistic. Kayla Bruun, a senior economist at Morning Consult, pointed out that while gas prices are highly noticeable to consumers and might slightly affect their spending, this isn’t a major concern as long as the job market remains strong.

However, recent figures on consumer sentiment released on Friday indicate that consumer attitudes have stabilized after improving during the winter months. Researchers at the University of Michigan noted in their March report that consumers see little evidence that the economy is significantly changing, either for better or worse. As a result, many are becoming more cautious with their spending compared to a few years earlier. During the earlier stages of the pandemic recovery, many Americans had substantial savings from stimulus checks, leading to increased spending on dining out and travel.

Read also: Instagram changes policy, it will no longer show political content by default

Although some of this spending continues, it’s now happening at a more moderate pace, according to experts. Budget-conscious consumers have reduced their spending, while wealthier individuals are still spending, particularly as airlines focus on attracting high-spending travelers. Retail sales data from February showed a 1.5% increase compared to the same month last year, as reported in preliminary data on Thursday, but the increase from January was a more modest 0.6%.

“If you adjust for inflation, the sales were actually down a little bit,” Rossman said.

“A lot of people are saying, either with their words or even more so their actions, that maybe it’s not the best time to do a big home renovation or buy a new TV,” he said.

Wage growth in the U.S. remains higher than before the pandemic, and unemployment is still below 4%, although it increased slightly last month. However, high prices continue to diminish consumers’ earnings, even as inflation slows and some companies begin to reduce their price increases.

“People are spending for the most part because they have to, not because they necessarily want to,” Rossman added.

While the current economic indicators may seem mixed, most experts are optimistic about the economic direction. “The next steps will largely depend on the Federal Reserve’s decisions regarding interest rates in the latter half of the year,” explained Tuan Nguyen, a U.S. economist at the consulting firm RSM. RSM has recently become more optimistic in its forecasts, now predicting inflation could drop to 2% by midyear, influenced by positive retail sales data. The Federal Reserve aims for this 2% rate as it balances promoting economic growth without being overly restrictive.

Read also: SpaceX is set to conduct the third test flight of its massive Starship rocket on Thursday

Rossman observes that the economic data from this year indicates a slowly growing economy. He suggests this could reassure the Federal Reserve to maintain higher interest rates longer to manage inflation without significant negative impacts. However, he also pointed out that increasing credit card debt is a significant concern that could affect Americans’ economic outlook in the upcoming months.Top of Form

“I think it does very much depend where one falls on that spectrum, as far as are you in the 44% of Americans with credit card debt?” he said. “If so, those rates are at record highs, and that’s a tough burden.”

Latest articles

Sacramento takes measures to protect residents from summer heat with cooling centers

Sacramento, California - As the warmer months approach, Sacramento is getting ready to open...

Sacramento Memorial Auditorium hosts free Memorial Day event on Monday, May 27

Sacramento, California - On Memorial Day, the Sacramento Memorial Auditorium, located at 1515 J...

Woman sues Sacramento nonprofit after ice rink injury

Sacramento, California - A woman has filed a lawsuit against a nonprofit organization in...

FBI Sacramento field office issues warning for local residents

Sacramento, California - The FBI's Sacramento Field Office is sounding the alarm about a...

Sacramento’s Community Health Fair: A beacon of support for homeless residents

Sacramento, California - On Friday, April 26, First Step Communities, a county partner and...

May Lee State Complex: Honoring California’s longest-serving state employee

Sacramento, California - On Wednesday, Sacramento will witness the opening of the May Lee...

More like this

Sacramento takes measures to protect residents from summer heat with cooling centers

Sacramento, California - As the warmer months approach, Sacramento is getting ready to open...

Sacramento Memorial Auditorium hosts free Memorial Day event on Monday, May 27

Sacramento, California - On Memorial Day, the Sacramento Memorial Auditorium, located at 1515 J...

Woman sues Sacramento nonprofit after ice rink injury

Sacramento, California - A woman has filed a lawsuit against a nonprofit organization in...