Rising gas prices influence consumers' spending?

Over the past year the fluctuating gas prices resemble a roller coaster at Disney World. Just when you think prices are dropping, they start to rise to an even higher level than previously experienced. Gas prices combined with consumers’ passion for SUVs, trucks and the need for multiple cars in one household are taking huge chunks of the family’s budget.

At Prosper Insight & Analytics, we investigated the influence of gas prices on consumers’ purchase decisions through an annual Consumer Snapshot survey over a 13 month period between June 2012 and July 2013. During the week of June 4, 2012 the average cost of gas across the country was $3.67/gallon. Of the 8750 consumers aged 18 and older surveyed, 72% stated that the price of gas influenced their purchase decisions. Moving forward six months to the first week of December 2012, gas prices around the country dropped to an average of $3.46/gallon. When asked the same question, 69% of the 8333 consumers responded that the price of gas influenced their purchase decision. In the first week of March 2013 gas prices soared to $3.82. News analysts started to talk about the $4.00/gallon possibility. Consumers driving SUVs were experiencing sticker shock at the pump as it their vehicles required an increasingly more amount of money to fill the thirsty tanks. 74% of the 5050 consumers surveyed stated that gas prices influenced on their purchase decisions. This brings us to the first week of July 2013. Gas prices settled somewhere in a more “reasonable” price range at $3.61/gallon. That is to say news analysts and consumers no longer talked about the possibility of gas reaching $4.00/gallon. We surveyed 5635 consumers of which 70% stated that the price of gas influenced their purchasing decisions.

These findings have significant implications for retailers, restaurateurs and consumers in their financial planning decisions. There is positive relationship between (a) the cost of gas and (b) the percent of consumers who change their spending patterns because gas prices. In other words, when gas prices go up, the majority of consumers spending patterns are impacted.