Tuesday, November 4, 2014

More Money for Christmas Shopping, Retailers?

An expert today shared on the radio that a penny drop in the cost of gasoline translates into $1 billion (yes, BILLION) more in consumers' aggregate pockets. Therefore, in the past few months, $60 billion more dollars are available for holiday shopping.

Really? I love it when there are these kinds of estimates. They sound just scrumptious to double-check like chomping into a Honeycrisp apple.

There are 120 million workers in the US according to the Department of Labor. We drive on average 13,000 miles/year according to the Department of Transportation, or 250 miles/week. The average tank size is 15 gallons. So $0.01 less in the cost/gallon equates to $0.15 per tankful, which on average gets us 300 miles. Thus, we have an extra 15 cents per week to shop. At a 60 cent drop, I'm saving $9/week or $36/month. On average we spend about $700 for gifts during this Christmas season. So I might, and I emphasize 'might', have an extra $108. Woohoo! Baby, you're getting that diamond necklace now.

Collectively, there's an extra $18 million (no, not BILLION) per week in our pockets. In order to get to $1 billion, we'd need to altogether save our dime and nickel for 55.5 weeks. Okay, call it 55 weeks. That's over a year. If gas prices have dropped 60 cents, that makes $1 billion in our pockets over the time the prices dropped.

So if you're a retailer, and you're counting on an extra $60 billion pumping into the economy, you might have to wait till Christmas 2015 before you see it. And that's only if I, my family, my neighbors and a whole bunch of others, save their dimes and nickels in the penny jar.

However, food prices are going up 2% over the past year and I spend more on groceries and eating out than I do on fuel (2-3x). So I think my nickels and dimes are going to my local grocer and restaurateur more than my retailer. Sorry, guys.

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