Skyrocketing fuel prices take toll on American consumers
March 29, 2011
By Mark Trumbull | Christian Science Monitor: American incomes continued to rise in February, but not enough to offset rising prices at the gas pump and grocery stores. The unwelcome shift points to a potential danger spot in the economic recovery — the risk that inflation could chip away at consumer well-being.
Overall, income from employment and other sources rose 0.3 percent in the U.S. in February, on par with the trend over the past half year or so, according to a report released Monday from the Commerce Department. Consumer spending rose even faster, by 0.7 percent — partially due to growing confidence in the staying-power of an economic recovery.
But as the recovery has taken hold, so has an upward trend in prices for basic commodities like grains and gasoline. In February, U.S. consumers were basically forced to spend more because of rising prices for groceries and fuel. Adjusted for consumer-price inflation, the gains in household earnings disappeared, with “real” disposable personal income actually falling 0.1 percent for the month.
“The American consumer does not seem to be getting a break in the first quarter of 2011 due to rising gasoline and food prices, a poor housing market, tight credit conditions, and stock market volatility,” economist Chris Christopher of IHS Global Insight wrote in an analysis of the Commerce Department numbers.
Despite the negative forces weighing on household pocketbooks, Mr. Christopher also notes improvement in the job market and a broad income boost for Americans because of the one-year cut in payroll taxes passed late last year. Read more