As Gas Prices Begin To Fall, Consumer Confidence Holds

A month or so ago, we asked Joe Pawlak, v.p. at Technomic Inc., when we should get worried about gasoline prices. “When they get to $4.30 to $4.40,” he wrote us. Pawlak has told us in the past that each successive run-up in the price of gasoline raises the threshold consumers have for when it begins to bite into their spending. That’s good news for restaurant operators who have seen their sales and traffic counts battered in the spring during the past two years.

Well, maybe the third year is the charm. Prices at the retail and wholesale level have begun to decline slightly in some parts of the country, after running up for the better part of two months. The national average stood at $3.907 a gallon for unleaded regular on Monday, April 16, according to AAA’s Daily Fuel Gauge Report. That’s down two cents from a week ago, though still more than seven cents higher than a month ago. The national average was only eight cents higher than a year ago, said AAA. Prices last year peaked in early May.

Meanwhile, a major gauge of consumer confidence released last Friday suggested that while consumers are feeling the pinch of higher gas prices, optimism about jobs growth is overcoming their concern. The preliminary reading of consumer sentiment from Thomson Reuters/University of Michigan fell only slightly to 75.7 in mid-April from a final reading of 76.2 in late March. The survey’s Current Situation Index fell to its lowest level since December, but the research group’s Expectations Index hit its highest level since September 2009.

The gas-price declines appear to be most pronounced in areas of the country with some of the highest prices, according to data from AAA and the U.S. Energy Information Administration, including Chicago and California.

Driving the change is a leveling of crude oil prices and an actual decline, since March 1, of wholesale prices. While there are still some problems in the market, mostly related to refinery shutdowns, it appears the worst may be behind us.