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It's a gas holiday as lower gas station prices keep more money in your wallet

U.S. consumer spending remained resilient in July as savings from lower gasoline prices helped offset persistent inflation and recession fears.

Gasoline prices have fallen more than 21% from a peak of $5.01 a gallon on June 14 to $3.94 on Wednesday, according to AAA, and experts say consumers are starting to take notice. The U.S. Commerce Department reported Wednesday that excluding gasoline and auto sales, overall retail sales rose 0.7% in July from a month earlier.

Economists and industry analysts said it showed shoppers were finding ways to keep spending even in the face of a host of economic challenges. “Retail sales are holding steady now. All things considered, that’s actually a very good sign for consumers and the economy. The big question going forward is that inflation will remain high,” said Ted Rossman, senior analyst at Bankrate. for how long, and to what extent consumers will change their behavior. While gasoline prices are up 24% from a year ago, consumers are relieved by the recent price drop at the gas station, allowing them to Spend elsewhere. As a result, nine of the 13 retail categories detailed in the Commerce Department’s report Wednesday showed sales rose in July. Jeffrey Roach, chief economist at LPL Financial ( Jeffrey Roach said: “Retail sales data tells us that as gasoline prices drop, consumers have more money in their pockets to buy other items like furniture and electronics. ” Ian Shepherdson, chief economist at Pantheon Macroeconomics, told the Wall Street Journal on Wednesday that consumer spending has fallen after nine weeks of falling oil prices. The interviewer finally said, “That’s good news, let’s go shopping. ” This could be a good piece of music for President Biden, who has been desperately trying to lower gasoline prices amid dwindling approval ratings. The Biden administration has withdrawn from the Strategic Petroleum Reserve Unleashed 180 million barrels of oil, questioned oil and gas chief executives over his company’s record profit margins and called on gas stations not to take advantage of the situation to raise retail prices — all as it grapples with rising prices. Gas costs. But despite these efforts, only 12% of Americans believe Biden’s policies are effective, according to a July CNBC survey. The latest retail sales report may be more realistic than the What the president wants is more complicated, even as lower oil prices help boost consumer spending.

Not all good news

Although the latest retail sales data show But Wednesday’s report wasn’t all good news. While lower gasoline prices helped consumers keep spending, despite inflation not seen in four years, shoppers’ slump in retail sales data didn’t take inflation into account. There’s less money. Overall sales in July were up just 0.1% year-over-year when adjusted for inflation. Many consumers also look to credit cards to fund their spending as inflation squeezes their budgets Bank of America found that total credit card spending rose 5.4% year-over-year last month. Greg Daco, chief economist at Ernst & Young Parthenon, said: “The high inflation environment is hitting consumer sentiment. Morale and purchasing power have forced many households to tap their savings and use credit. ” On top of that, consumers are now saving well below their pre-pandemic levels. The personal saving rate, which measures consumer savings as a percentage of disposable income, fell to 5.1% in June, well below 2020 levels. 8.3% pre-pandemic in February. The latest retail sales data will only add to the debate over whether the U.S. economy is also in recession. While gross domestic product (GDP) contracted for two consecutive quarters, leading many to claim that the U.S. Already in recession, but most economists don’t think it’s official until the nonprofit research agency the National Bureau of Economic Research announces so. The labor market also added 528,000 jobs in July, recovering Industrial production rose 0.6% last month after contracting for two straight months, after all the jobs lost in the early stages of the pandemic, showing the manufacturing sector’s durability. Experts say it’s not exactly a recession. “June Retail sales were flat, but grew faster than core inflation, excluding gas stations and auto and parts sales. Bill Adams, chief economist at Comerica Bank, said the economy was not in a recession in July due to strong job growth, falling unemployment and higher retail spending in most categories. “The European energy crisis this winter remains the biggest downside risk to the economic outlook; however, the current data remains unchanged, suggesting that the surge in food and gas prices by mid-year was not enough to push the U.S. economy into recession.” While many investment banks say they believe a recession is almost certain, with JPMorgan Chase CEO Jamie Dimon even arguing that “it could be worse than a recession,” only time will tell if the U.S. will actually enter a recession. Good news for businesses: Falling oil prices are helping Americans keep spending.

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