By Robin Sidel And Nick Timiraos
Americans are taking the money they are saving at the gas pump
and socking it away, a sign of consumers' persistent caution even
when presented with an unexpected windfall.
This newfound commitment to frugality was illustrated this past
week when the nation's biggest payment-card companies said they
aren't seeing evidence consumers are putting their gasoline savings
toward discretionary items like travel, home renovations and
electronics.
Instead, people are more often putting the money aside for a
rainy day or using it to pay down debt. That more Americans are
saving their bounty at the pump comes as a surprise, because the
personal savings rate, after rising during and after the recession,
has declined steadily over the past two years.
"We haven't seen the extra savings from lower gas prices
translate into additional discretionary consumer spending," said
Ajay Banga, chief executive of MasterCard Inc., on a conference
call Friday to discuss quarterly earnings.
The new data is perhaps the best indication to date that the
pain of the recession remains fresh in the minds of many Americans,
even as the economy picks up steam.
The Commerce Department said Friday that the U.S. economy grew
at a 2.6% annual rate in the fourth quarter. Personal consumption
expenditures rose 4.3% at a seasonally adjusted annual rate in the
last three months of 2014, representing the biggest increase since
the first quarter of 2006.
Also on Friday, the University of Michigan said consumer
sentiment in January reached its highest level in 11 years. The
closely watched index has increased in each of the past six months,
rising 20% since July.
But that positive outlook doesn't mean consumers feel emboldened
to splurge with their savings at the pump, and card-company
executives said spending growth would have been higher if consumers
had put their gas savings toward more big-ticket items rather than
savings.
This year through Jan. 26, the national retail price for
gasoline averaged $2.21, according to the U.S. Energy Information
Administration. Average gas prices on Friday reached $2.05 a
gallon, down nearly 45% since June, when they stood near $3.68 a
gallon, according to auto club AAA.
That translates to average savings about $60 a month for the
average consumer, according to industry estimates, or more than
many workers have received in pay raises in years.
A survey of 4,500 consumers conducted by Visa Inc. in early
January found that consumers are hanging onto roughly half of their
gasoline savings.
Another 25% is being used to reduce debt, while the rest is
being spent on small purchases like groceries, clothing and fast
food.
"Since the recession, you have a much more cautious consumer,"
said Wayne Best, chief economist at Visa.
Both Visa and MasterCard said in earnings reports late this week
that consumers spent more money on their credit cards and debit
cards in the fourth quarter, but the lower gas prices put a lid on
the companies' growth rates. Discover Financial Services Inc. made
similar statements last week, and it blamed lower gas prices for
lowering its growth rate.
"It's a party at the pump," says Leo Divinsky of Los Angeles,
who says his wife already is using some of his family's $75-a-week
gas savings to pay down credit-card debt.
But the asset manager for a commercial-real-estate developer
says he isn't planning any major spending, outside of more frequent
road trips to see his brother in Northern California if fuel prices
stay low.
Gasoline spending tumbled 23.8% in January from year-ago levels,
according to First Data Corp. which processes electronic payments
for more than six million merchants.
Economists say the consumer benefits from lower gas prices tend
to accrue over time and that it isn't unusual for people to stash
any initial savings from the pump. If crude-oil prices were to stay
at $50 a barrel this year, that would translate to savings of
roughly $1,325 per household on gas over the coming year relative
to last year's spending, according to an estimate prepared for The
Wall Street Journal by ClearView Energy Partners.
As consumers become more convinced that lower prices "are
permanent, they're more likely to spend it," said Lewis Alexander,
chief U.S. economist with Nomura Securities. So far, "the initial
reaction has been to save it."
Mr. Banga of MasterCard said consumers may need to see low gas
prices for two or three more months before they feel comfortable
plowing the savings into other types of spending.
Consumers' confidence about their job situations can also shape
how much they are likely to spend. With the unemployment rate
falling steadily and employers consistently adding more than
200,000 jobs a month, "the positive effect on the economy should be
magnified," said Torsten Slok, chief international economist at
Deutsche Bank.
Mr. Slok isn't much discouraged by reports that consumers are
spending money to pay down debt, either, given concerns that
household-debt burdens--while down from their recession highs--are
still elevated. "We should be happy that consumers are paying down
debt, and we should be happy that consumers are spending," he
said.
Kathryn Grayson, a 23-year-old graphic artist in Asheville,
N.C., commutes about 15 minutes to work each way but hasn't yet
decided where to put her gasoline savings.
"Honestly, I should just try to make extra car payments," she
said. "Every little bit helps."
Write to Robin Sidel at robin.sidel@wsj.com and Nick Timiraos at
nick.timiraos@wsj.com
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