With rising threats of domestic terrorism, the weak economy and the wicked winter, consumers have been beaten down. Now, soaring gas prices are fueling even more angst — and the result is that the economy is losing $1 billion in consumer expenditure for every penny increase in pump prices, according to estimates from Salomon Smith Barney. Americans may still be filling up, but less often, and it’s exacting a toll at the local mall.
"The issue is the consumer mentality and that’s very fragile," said one senior operations executive at a national retail chain. "Some of the biggest issues, like gas prices, we can’t measure the impact it is having on customers. But if they are spending more on gas, it’s taking something out of the general retail market."
It’s tough to draw a direct connection between traffic in the stores and prices at the pumps, yet retailers acknowledge gas prices are one of several factors that contribute to negative store performances. If gas prices surpass $2 a gallon on a national average basis — as they already have in several urban areas — eventually it could be reflected in increased retail prices.
Then there are internal issues. Retailers have their own trucks to fuel up and stores to heat and it’s all getting more expensive. For now, they say they’re not offsetting higher costs by raising prices. And according to the senior retail executive, with fuel bills in December and January, "there was not a significant blip. We do a lot of things to hedge our bets on energy. There are gas contracts that protect us."
As far as the potential impact on retail prices, a Wal-Mart spokesman said, "We work every day to protect low prices, and will continue to through these times even with higher gas prices. Our lifeblood is our everyday low price and we will continue with that." During the first week of March, both the average ticket and customer count were up, he said, adding that any correlation to rising gas prices would be speculative.