American families are shelling out what amounts to $5,000 per year to put gas in their cars — a painful increase from $2,800 just a year ago, according to a new report.
The new study by Yardeni Research shows the ever-increasing financial burden borne by US households in recent months as the price of fuel has reached record levels.
In March, the annual rate of gasoline spending by US households was at $3,800, according to the study.
“No wonder that the Consumer Sentiment Index is so depressed. The wonder is that retail sales have been so surprisingly strong during April and May,” Yardeni said in a note.
Yardeni said that while Americans’ incomes are growing at a slow pace when adjusted for inflation, that doesn’t necessarily mean they won’t spend.
“When we are happy, we spend money,” according to Yardeni. “When we are depressed, we spend even more money!”
Yardeni’s statement is supported by newly released data about the nation’s spending habits.
US retail sales rose 0.9% in April, a solid increase that underscores Americans’ ability to keep ramping up spending even as inflation persists at nearly a 40-year high.
The increase was driven by greater sales of cars, electronics and at restaurants, the Commerce Department said Tuesday.
Even adjusting for inflation, which was 0.3% on a monthly basis in April, sales increased.
Consumers are providing critical support to the economy even after a year of seeing prices spiral higher for gas, food, rent and other necessities. The economy contracted in the first three months of the year, but consumer and business spending still increased at a healthy pace.
Gas prices fell slightly last month, restraining inflation, after soaring in March in the aftermath of Russia’s invasion of Ukraine. The latest data, however, points to an uptick in prices as analysts warn that the nation could see $6-a-gallon averages.
The average price of a gallon of gas rose nationwide to a record $4.56 on Wednesday, according to AAA.
US crude rose to $114.07 per barrel while Brent crude, the international standard, was trading at $114.86 per barrel as of Tuesday, according to the US Energy Information Administration.
“There is a real risk the price could reach $6+ a gallon by August,” Natasha Kaneva, head of global oil and commodities research at JPMorgan, told CNN on Tuesday.
“With expectations of strong driving demand … US retail price could surge another 37% by August,” JPMorgan analysts wrote in a report.