America is saving -- not spending -- its gas savings

The price of gas plummeted in late 2014 and economists were talking about all the ways Americans would spend their extra gas savings.

It turns out, they’re just saving it.

A note from Deutsche Bank on Monday notes that December retail sales beat expectations, but figures for both January and February have declined.

The firm writes:

But what about the windfall from lower gas prices? Wasn’t this supposed to offset these other concerns? Gas prices have rebounded to $US2.45 from the low of $US2.04 in January, but are still down 29.7% y/y in March. What are consumers doing with the extra money? [The chart] appears to show that much of the benefit from lower gas prices is being saved.

And so what next? Deutsche Bank says it expects comparable sales to accelerate after a weak first quarter as some of the increased savings get spent by consumers.

Another reminder that while economic theory may assume rational actors, we’re just people after all.

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