The Pump Price Perception Problem
Higher gas prices are a potent force in affecting consumer spending, not so much because this occupies a huge portion of budgets, but because it drives consumer psychology, especially pertaining to inflation expectations and their real incomes.
According to the Bureau of Economic Analysis at the Department of Commerce, gasoline purchases in aggregate accounted for about 3.5% of total consumer spending, or about $350 billion in 2010. (Figures for 2011 are not yet available.) In 2008, when we had the oil price spike, gasoline purchases in aggregate were $410 billion vs. spending on gasoline of $335 billion in 2006 and $365 billion in 2007. To put this into perspective, aggregate consumer spending is roughly $10 trillion....608 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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