Rising gas prices: Good news or bad news?

Retail Wire panelists recently commented on the rise in pump prices, and whether they will cause a slowdown in the economic recovery. I don’t feel the situation is the same as in 2008, and here’s why:

I think there are mixed messages here: Certainly the last big gas price spike (in summer 2008) put a crimp in consumer spending just before the recession hit with full force. But there is a big difference between $3/gallon gas and $4.50/gallon gas in consumers’ minds. It’s just possible that the slowdown in spending was an early sign of the economic slowdown rather than a reaction merely to pump prices.

You can also make a case that a rise in gas prices is a sign of higher demand and therefore a recovering economy. If people are starting to return to the workforce and do more discretionary travel, they will need to drive more and gas prices will rise accordingly. But these are positive signs, likely to manifest themselves in other ways such as higher consumer spending. Let’s keep our fingers crossed!


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