Here’s a funny one: Americans have spent their gas savings on gas.
On Thursday, the first estimate of third quarter GDP showed inflation-adjusted personal consumption expenditures on gasoline rose 4.1% over the prior year, the most in at least 15 years.
Overall, the personal consumption was up 3.2% in the quarter, a bright spot in a report that otherwise showed US the economy’s rate of growth slowed to 1.5% in the third quarter after a 3.9% increase in the second quarter. So, not a disaster of a quarter, but certainly a slower growth period for the US economy.
And as Paul Ashworth at Capital Economics wrote on Thursday following the report, “Frankly, you can spin these GDP figures either way.”
Ashworth added, “Headline GDP growth slowed to below the economy’s potential growth rate of about 2%, but the drag from inventories won’t be repeated in the fourth quarter. The strength of consumption growth was encouraging, but the waning of business investment was a little troubling.”
As for the increase in gas spending despite the decrease in gas prices, we perhaps shouldn’t be that excited.
Back in September we highlighted a passage from behavioral economist Richard Thaler’s latest book “Misbehaving,” which noted that during the sharp decline in oil prices seen during the financial crisis, consumers didn’t save the extra money or spend it on something else, they simply bought higher quality gas.
Also: Americans are driving again.