Doomsayers have pointed to high gas prices destroying consumer sentiment, crushing consumer spending, and ultimately ending the American economic recovery.
However, this fear has largely been debunked as we’re learning more and more that the rate of increase is more important than just the level of gas prices.
Bank of America’s restaurant analyst Joseph Buckley reiterates this same sentiment in a note to clients today.
Gasoline pump prices have increased steadily thus far in 2012 from $3.30 per gallon to more than $3.90 per gallon. Most restaurant companies that have commented on higher gasoline prices have noted a thus far negligible impact on sales, but we attribute part of the recent softening of full service restaurant sales to rising gas prices. The economic effect of higher gas prices is undeniable as each penny per gallon increase in price absorbs about $1.4 billion in consumer spending. However, a $4 per gallon price point is no longer shocking to consumers so the psychological impact of higher fuel costs may not kick in unless pump prices go to new records.
Restaurant sales have more to do with jobs than with gas prices. Buckley explains:
This is a simple and logical relationship. When consumers are employed, they spend more time away from home and more meal occasions will involve restaurants. Breakfast and lunch meal occasions are more likely to be at restaurants within the flow of a work day. Obviously, employed consumers have incomes and presumably more money to spend in more discretionary ways, including dining at restaurants.”
Photo: Bank of America