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Home » Foundering prices perk up consumer confidence

Foundering prices perk up consumer confidence

January 19, 2016

WASHINGTON (1/19/16)--Bottomed-out oil prices continue to influence consumer activity, as illustrated by three reports released Friday that provide a compressive glimpse into the state of U.S. consumerism.

The cost of producing goods and services plummeted in December, with the producer price index dropping 0.2% for the month and 1% for the year, the largest decline in five years (MarketWatch Jan. 15).

Gas prices almost singlehandedly drove the index down, falling 8.3% during December and 29% in 2015.

The effects of low oil prices also crept into the rate of retail sales in December. Sales fell 0.1%, capping the slowest year of retail sales gains since 2009--at 2.1% for 2015, according to the Commerce Department.

A large portion of the declines can be attributed to falling gas prices, as sales at gas stations dropped 1.1% in December after a 1.3% dip in November.

Even when pulling gasoline prices out of the equation, retail sales still only climbed 3.9% for the year.

“People just aren’t spending their dollars like they used to,” said Steve Blitz, ITG Investment Research chief economist (MarketWatch).

But that trend may change.

The University of Michigan’s monthly consumer sentiment index, which rose to 93.3 from 92.6 in December, found that consumer spending plans look promising.

The sub index tracking consumers’ future expectations rose 3 points, largely thanks to the prospect of continued flat inflation.

“Gasoline prices have shrunk massively on the back of oil’s price decline, giving families some extra financial security and spending money,” said Jeremy Cohn, Moody’s analyst (Economy.com Jan. 15).

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