However, more economic trouble is possible. One analyst estimates that the recent spike in gas prices after Russia’s invasion Ukraine could add up to $2,000 annually to the average household budget.
For the first time since 2008, the average price of a gallon regular gasoline has exceeded $4 per gallon. According to AAA, many consumers have witnessed gas prices rise quickly. The average price for a gallon of regular gasoline rose 41 cents in the first week of Russia’s war with Ukraine.
According to Yardeni Research, this will likely result in an increase in gasoline prices for the average household of $2,000 annually. Yardeni Research released a Monday research note. Yardeni stated that this is on top of the approximately $1,000 increase in grocery store prices due to inflation. This means that the average household will have $3,000 less to spend on other goods.
Many consumers are already worried about the financial impact of the pandemic. Some have begun to reduce their driving and monitor their spending. This could be a threat to economic recovery from the pandemic, as personal consumption accounts for about 70% of gross domestic products, according to the Federal Bank of St. Louis.
Andrew Liptak, a writer from Barre, Vermont said that he emailed to his boss after local gas prices rose to $4.25 per gallon. His 34-mile round trip to work — which is hilly and therefore consumes more gas — had suddenly become much more expensive.
Liptak, 36, stated that “In the meantime I might as well attempt to not drive as often as I can.” I’ve been thinking about that. It will also include not driving too far to see movies. Liptak plans to combine errands so that he can make one trip, instead of making multiple trips.
He is most concerned about the price of home heating fuel. He noted that the last time it was $500 per full tank, it was $500 in 2005. “I expect it will be more this time.”
Consumers expressed concern about the commute cost on social media. One commenter noted that they live paycheck-to-paycheck and have a budget of “nine nickels.” “This week, I’m short. People like me are paying real life consequences and no one speaks about us.
Some taxi drivers are now asking for fuel surcharges, or other relief to help them cope with rising gas prices. According to the Vancouver Sun, a Canadian taxi driver association asked to impose fuel surcharges for taxi trips. Uber responded to a question about whether it might raise its rates because of fuel costs by saying that it has a service that offers discounts up to 25c per gallon at certain stations.
In an email to CBS MoneyWatch, an Uber spokesperson stated that they will continue to monitor gas prices as well as listen to drivers in the coming weeks.
Consumer pain
According to Capital One, inflation is causing financial difficulties for some consumers. The survey found that 44% of Americans couldn’t pay their bills in the past month. 62% reported having cut back on spending.
According to Melissa Bearden, Capital One’s head for consumer intelligence and the new Research, Americans feel almost the same as they did at the beginning of the pandemic.
Bearden stated that Americans of all income levels feel the effects of inflation and are making adjustments to their spending habits. This includes gas and groceries. The thing that really lands me at home is the amount of strain the American public already feels and how they are preparing to continue it.
The research revealed that half of low- and middle-income earners (defined by Capital One as those who earn less than $25,000 per household and those who earn between $25,000 and $100,000) have cut back on their discretionary spending on entertainment, shopping, and dining out.
The pressures of the Russian invasion could cause inflation to rise, according to David Kelly, chief global strategist at JPMorgan Funds. This includes higher gas prices and potentially higher prices for fertilizer and grains, which could boost food prices.
He noted that this could boost CPI inflation to 8.0% in March, year-over-year.
This is compared to the 7.5% inflation rate in January, which was the highest level of data available. On March 10, the government will release its next inflation report, which will track the increase in consumer prices in February.
Yardeni Research predicts that higher prices could affect household budgets. “The rise in commodity prices as a result of the war is likely depress consumers spending now that they must spend more on gasoline, food and other necessities.
