NEW YORK - Consumers have been pocketing the savings as gas prices fall rather than spending it, the Associated Press reports.
Typically, lower gasoline prices have been a bright spot for consumers during a sluggish economy, but retail sales stalled in April and May while gas prices have dipped.
The average price of regular gas fell to $3.53 a gallon for the week ending June 18, according to the U.S. Energy Information Administration, off 10% from the year??s peak of $3.94, recorded in early April. It was the 11th consecutive week of declines.
Despite the downward trend, spending on restaurants, building materials, recorded music, and even gasoline has fallen.
Some economists said consumers are anxious about a weak job market as well as debt troubles in Europe, which has limited hiring and income growth.
"Lower gas prices will certainly help, but it's a pretty bleak situation to begin with," said Mark Vitner, senior economist at Wells Fargo Securities. "The more uncertain people are, the less likely they are to spend, and the more likely they are to put additional purchasing power into savings."
According to the Energy Information Administration, a 10-cent drop in gas prices can lead to a 0.1% rise in disposable income. However, to date, lower prices have fueled an increase in consumer confidence.
A report measuring consumer sentiment released earlier this month from the University of Michigan and Thomson-Reuters revealed a decrease for the first time in 10 month.
According to Vitner, gas prices may have less influence than job creation on consumer spending. Earlier this year, despite rising gas prices, consumer spending increased when the job market appeared to swing upward. However, the job market is again weakening, he said.
"I am not sure [lower energy prices] will drive the economic recovery," said Kay Smith, a senior economist at the EIA. "There is enough economic uncertainty concerning the employment situation."
Dean Maki, an economist at Barclays Capital, said lower fuel prices should eventually boost spending as consumers adjust. Prices for food, drugs, and gas fell in May from the prior month for the first time in two years. "The bulk of the response by consumers to that drop is ahead of us," Mr. Maki said.