Gas prices continue to increase in the U.S., well before driving season kicks off over Memorial Day Weekend, but economists at the nation’s largest financial institutions continue to see little impact on the economy.
In a note this morning, Citi Auto Analyst Itay Michaeli said channel checks continued to correspond to a surprisingly healthy 14.2 million annualized sales pace.
“On auto sales, February checks suggest no visible impact as the rise in gasoline has corresponded with improving consumer confidence, unlike in 2008,” Michaeli says. “We note, this backdrop may actually aid demand since today’s vehicle offerings are more fuel efficient.”
Michaeli’s report follows commentary by Deutsche Bank’s Chief Economist Joseph LaVorgna, who said that unlike over the past few years, consumers remained active even against growing energy expenses.
“At the moment, we believe the economy can withstand the recent increase in oil prices, provided that they do not increase substantially further and remain at elevated levels on a longer-term basis,” LaVorgna said last week. “In our view, it is both the magnitude and persistence of oil price changes that matter. Importantly, there is some offset coming from lower natural gas prices and reduced utilities consumption, owing to an unseasonably warm winter.”
According to AAA, average regular unleaded gasoline stands at $3.698, $0.34 higher than year ago levels. Nonetheless, the number of miles driven during a 30 day period ticked up for the first time sequentially in nine months during December.
Auto manufacturers will report February sales on Thursday.