It was back in late February that gasoline prices really started capturing the attention of the media, and everyone started wondering whether the economic recovery would be killed.
Lots of people were worried, but some economists were sanguine for two big reasons. They noted that what really matters is not price, but change in price. And beyond that, they argued that each time gas prices rise, consumers get conditioned to that level, and so higher prices aren’t as damaging the next time.
In other words, the fact that we saw high prices around this time last year, and the fact that we had high prices in 2007-2008 had already taken away some of the sticker shock.
Check out this chart of the year-over-year change in retail sales.
The vertical line is right when all the gas prices stories were reaching a crescendo.
Yes, same-store sales did fall to multi-month lows.
But then, you know what, they surged right back towards multi-month highs once the quick change aspect wore off.
Since then basically all retail indicators have come back, as consumers find themselves able to cope with higher prices — prices that they’ve seen before.
And today the Bloomberg Economic Comfort Index just surged to its highest level since March 2008.
As the economists predicted, gas prices aren’t killing this economy.