People keeping gas savings

Consumers wary of spending causing retailers to fret

A motorist fills up Tuesday at a Shell station at Eighth and Broadway in Little Rock, where regular gasoline was $1.89 a gallon.
A motorist fills up Tuesday at a Shell station at Eighth and Broadway in Little Rock, where regular gasoline was $1.89 a gallon.

U.S. consumers are benefiting from some of the cheapest gasoline prices in years, but their hesitancy to spend the savings on Christmas shopping is dampening a crucial time of the year, retailers say.

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Arkansas Democrat-Gazette

Graphs showing Arkansas and U.S. gas prices.

Cautious consumers, still concerned about the economy and struggling with stagnant wages, have been saving or using their extra money to pay down debt, economists say.

Economists and analysts are starting to question whether the big Christmas sales offered by retailers will be enough to attract customers and motivate them to spend money.

The average consumer will have an extra $50 to $75 to spend this Christmas, said Tom Kloza, chief oil analyst for gasbuddy.com, a gasoline price-tracking website.

But, he said, "It's really difficult to translate whether they are going to spend it this holiday season."

Fuel prices have been lower for much of the year compared with 2014 as a global oil glut pushed down crude prices and the prices for other petroleum products.

Pump prices nationwide are hovering around $2 a gallon, with many stations selling gasoline for less. Analysts expect the national average to dip below $2 before the end of the year.

The 42 million Americans expected to travel by car this week will be paying the lowest prices for gasoline at Thanksgiving time since 2008, according to AAA.

In Arkansas, gasoline prices averaged $1.90 a gallon Tuesday, down from $2.66 a year ago, according to AAA's daily fuel gauge.

Some of the cheapest prices in the state Tuesday were in Siloam Springs, where a gallon of gasoline was listed at $1.59.

Gasoline was being sold for $1.63 a gallon in Bentonville and Rogers, and in Little Rock gasoline was selling for as little as $1.81, according to gasbuddy.com.

Many analysts and economists said retail sales should have seen a lift when energy costs began to drop. Government reports indicate slight increases in personal income this year. Personal income grew 0.9 percent on average in the United States in the second quarter, after growing 0.8 percent in the first quarter, according to the U.S. Bureau of Economic Analysis.

"We ... would have expected consumers who really have seen good income gains to spend those dollars that they save from lower gasoline prices," said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville.

She said consumers are "in some sense substituting those savings for raises," but they aren't spending as they would if they were to receive actual raises.

That reluctance to spend is expected to continue into the Christmas shopping season, which kicks off with Thanksgiving and Friday sales.

The forecasts for Christmas spending are "pretty muted," Deck said.

"They kind of look like the last couple of years," she said. "Particularly big-box, brick-and-mortar stores aren't expected to have the kind of holiday you would expect them to have with gasoline prices like they are."

The National Retail Federation expects sales in November and December to rise 3.7 percent from last year to $630.5 billion. Christmas season retail sales in 2014 rose 4.1 percent over the previous year.

Friday, the traditional start of the Christmas shopping season, is called Black Friday because it's the day when many retailers begin to see profits for the year.

Many retailers began offering big discounts early this month to pull in consumers. Also, some stores will be open Thanksgiving Day and will offer holiday deals.

In-store sales at big retailers are expected to be muffled in part because of the growing shift to online shopping and because consumers are wary of spending.

This is placing pressure on retailers that feel the need to offer prices that will attract buyers at a time when buyers are seeking to get more for their money, said Rob Lutts, president and chief investment officer for Cabot Wealth Management.

"Consumers may be waiting for the big sales," he said. "The Black Friday period may be a bonanza. People may be deferring their purchasing until the sales come."

A Section on 11/25/2015

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