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Disappointing Retail Sales Growth - 5/21/15

One of the questions that has emerged in recent months is why retail sales growth has tended to be disappointing despite the prevalence of low energy prices.  According to Moody’s Analytics, nominal consumer spending on motor vehicle fuels, lubricants and fluids during this year’s first quarter was nearly thirty percent below its year-ago level.  At an annual rate, this translates into savings of approximately one hundred and six billion dollars. 

Data indicate that rather than spend their fuel savings, many Americans have put that money away, at least for now.  Between November of last year and March of this year, the U.S. personal savings rate climbed from four point four percent to five point three percent.  One theory is that fuel savings have disproportionately gone to higher income, middle aged families living outside of big cities. 

These families tend to have a lower propensity to spend money since they already tend to have much of what they need.  Unlike families that live paycheck-to-paycheck, these more affluent families are more likely to take time to determine how and whether to spend any windfalls.  Conventional wisdom suggests that these families will begin to spend more aggressively as we approach the summer months.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.