By Mark Huffman
ConsumerAffairs.com
May 1, 2007
On the surface, signs point to a still-robust economy, but a closer reading of statistics may be grounds for a little anxiety. One economist fears rising gasoline prices could be the wildcard that spoils the party for consumers.
People spent more in March but may be enjoying it less as the rising price of energy is cutting into what they actually take home, said economist Joel Naroff of Naroff Economic Advisors in Philadelphia.
Reacting to government statistics showing consumers both made and spent more money in March, Naroff said he sees signs that high fuel costs are already causing consumers to curtail discretionary spending.
A closer reading of the numbers, he says, shows the only thing consumers bought more of in March was non-durable goods in this case, mostly gasoline.
Rising energy prices is the major factor behind that increase and after we adjust for inflation, we actually carted home fewer goods, Naroff said. Basically, the strong gains in income are being greatly eroded by the rising prices.
Whats happening, says Naroff, is a disconnect between Federal Reserve policy makers and consumers. On one hand, the Fed looks at the numbers and decides inflation is pretty much under control. But consumers look at their fuel bill and decide to spend less on other things.
On the inflation front, if you are a consumer, things are not good, he said.
With few signs that oil prices will go down soon, Naroff believes consumers could feel pinched throughout the summer.
