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Specialization is for Insects.
Posted on Oct 22, 2006 - 9:20am by John P. in Finance
The October 23 issue of Business Week magazine had an interesting report about the impact of falling gas prices on the economy:
Falling gasoline prices are freeing up more cash for consumers to buy other goods and services. Early evidence has already emerged in some September figures, but the biggest impact is still to come. What’s more, heading into the winter, heating bills should be smaller than last year’s.
During September, retail gasoline prices averaged $2.54 per gallon. That was down not only from August but also from September, 2005, when the average was $2.91. Based on this year’s lower price and a small uptick in demand for gas, consumers shelled out about $3.7 billion less for gasoline this September vs. the same month a year ago, according to Wachovia Corp. (WB ) economists Gina Martin and Jason Schenker. With chain-store sales coming in above expectations, it appears consumers used that money to shop.
Because decreasing oil prices also affect home heating bills, consumers should see savings in that area as well.
That extra discretionary income should be spent largely on nondurable goods and services. Retailers selling big-ticket items, such as appliances and vehicles, are less likely to see a boost since the sharp slowdown in housing prices and higher interest rates play a bigger role when it comes to those spending decisions. Even so, cheaper energy could wind up being a nice gift for retailers heading into the holiday season.
Now, I’m not telling anyone to go out and buy stock in retail companies, but if you have been holding some in your portfolio I would think that they might perform well through the holiday shopping season.
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