http://www.kcci.com/project-economy/black-fridays-real-deal-cheap-gas/29968338
The article argues that the best deal of Black Friday is low gas prices. Gas costs 50 cents less than it did at this time last year. Economists and CEOs of retailers predict that consumers will be willing to spend more this holiday season, simply because of the savings they will earn from lower gas prices.
The article continues to say that it is likely for gas prices to drop even further, a contributing factor as to why Americans are feeling better about the overall economy. In a recent CNN poll, 52% of Americans think things are going well in the country now, the first time a majority of Americans have felt that way in eight years.
The article concludes by thanking U.S. drillers and OPEC for the likeliness of gas prices to stay low into 2015 and 2016, driven by the shale gas boom that is bringing a huge new oil supply onto the world market and keeping prices low.
I was not surprised to read that people will be willing to spend more this holiday season because of the savings they will earn from lower gas prices. However, I found it interesting that simply because of lower gas prices, Americans felt better about the overall economy. I think this can somewhat be attested to Keynes' Animal Spirits.
If retailers do spend more, it will be difficult for them to judge whether or how much of the increase in sales was due to the oil prices and how much was due to them opening early or their marketing actions. Could create a real dilemma for some of these companies and create some uncertainty over decisions that they will make next year.
ReplyDeleteIt is hard to make a direct correlation between lower oil prices and consumers willingness to spend during the holidays. The connection does make sense though because whenever some inelastic good, such as gas, drops consumers have more liquidity to spend on luxuries, or anything that makes them happy. American's confidence in the economy is heavily dependent on gas prices because typically they are so high that when an event such as gas dropping 50 cents per gallon, makes American's view that everything else in the economy is going smoothly as well.
ReplyDeleteI am of the same mindset of the majority of Americans that believe good times will continue, at least for the next few months. OPEC was put into a very tough position since they are responsible for 40% of the world's oil production. Either they could decrease production in hopes that the United States can't keep up with its current pace of crude production, or they could continue their current production in hopes that the market will settle and the United States will decrease production. It will be very interesting to see how long oil prices continue to fall, and it depends in large part in my opinion on the United States' ability to maintain its current production.
ReplyDeleteFor most American's, especially those who aren't well informed, gas prices tell them how the economy is doing, and thus determine their confidence. Since the majority of people probably buy gas at least once a week and are very aware of the prices once they start to decrease they feel even more confident. Most people who pay closer attention to the economy probably don't have their confidence effected much at all by gas prices, unless there are geopolitical reasons for the gas price fluctuations. Thus, when gas prices go down the majority of the population will probably feel "richer" and purchase more. It's nice to see that the majority of the population is confident in the economy.
ReplyDeleteI agree with John, several Americans look at prices of things such as gas to tell them if our economy is getting better or not. Seeing gas prices decrease increases consumer spending because their confidence in the economy has increased. Something as simple as saving a few dollars on gas can increase consumption on other things.
ReplyDeleteThe correlation between the two entities is very hard to pin point. Lower gas prices may give households the luxury of higher disposable income, in terms of their lower spending. However; how much they spend during the holidays may not necessarily point towards lower gas prices. Many others factors may very well be in association with higher spending towards luxuries (holiday shopping etc.).
ReplyDeleteThis article was similar to my article because it discuss how consumers feel better about the economy as gas prices fall. Also, there is projected to be more spending during the holiday season, which can give our economy a little boost at the end of the year.
ReplyDelete"Economists and CEOs of retailers predict that consumers will be willing to spend more this holiday season, simply because of the savings they will earn from lower gas prices."
ReplyDeleteThis sentence especially brings to mind the shift in Daylight Savings Time that occurred under the Bush administration, as it was proven that what Americans did with more hours of daylight was shop. All in all, the article seems to point things out that one might night think about right away but seem obvious, retrospectively.
I believe consumers will spend more but not much more. I feel like consumers of gas will use the money they are saving to maybe invest or put it in savings to grow interest. fifty cents is a big decrease but as we saw with black friday not everyone is spending money at the stores but hopefully on needed items to provide for their family.
ReplyDeleteBased on the outcome of lower Black Friday sales than the past few years, it'll be interesting to look toward the future and see if this article's prediction comes true. I think the lower gas prices do give people hope, but whether or not they'll show that hope with their wallets is to be determined.
ReplyDelete