Consumers are drawing a line in the sand when it comes to gas prices. According to the March RBC Consumer Outlook Index released Friday, 18% of consumers said they would cut back on spending if the price reaches $3.75 per gallon. For 41% of consumers, $4.00 is their limit. Almost one-third have already cut back on their spending as a result of increased gas prices.
At the time of the survey, the national average for a gallon of gas was $3.20. The Energy Information Administration reported on March 1, that the national average retail price for regular grade gasoline for the previous day, Feb. 28, was $3.38.
"What really stands out to us is worry about the future," Tom Porcelli, RBC Capital Markets chief U.S. economist, said in a statement. "The geopolitical issues of recent weeks are seeping into expectations about markets and respondents' financial position. The number of people who expect the value of their investments to 'get worse' rose to the highest level in four months. The erosion in personal finances has translated into people thinking they will have less to spend on discretionary items, and that number rose to the highest level in at least a year."
The Index fell just two points to 42.5, but this is the third consecutive month consumer confidence has fallen. Among consumers' concerns is worry about inflation on products; 93% anticipate higher prices for oil and gasoline, and 90% expect to pay more for food. Consumers were less worried about prices for durable goods. Two-thirds expect to pay more for clothing, while 56% anticipate higher prices for vehicles, and 52% expect higher prices on appliances.
"This phenomenon is not limited to the here-and-now, either. Indeed, those expecting prices will go up over the next five years also jumped significantly," Porcelli said.
Across the sub-indices, the expectations sub-index fell the most, dropping over three points to 53.6. After holding steady for several months the investment confidence sub-index fell just under three points to 36.3, and more than half of consumers have lost confidence in their ability to invest in the future.
The current conditions sub-index fell two points to 32.4. Forty-seven percent of consumers think their financial situation is weak, the highest level since July 2010, according to the Index. Almost one-third think the economy and their own situation will get worse in the next year. Although unemployment fell to 8.9%, the jobs sub-index slipped to 50.1 from 50.9 in February.