Pain at the Pump: Great Expectations

Earlier this month, the Energy Information Administration (EIA) significantly downgraded the forecast for summer (April through September) pump prices by 16 cents per gallon to $3.79. With the EIA changing their expectations for the summer, are consumers doing the same? Will the pain at the pump impact Memorial Day? And how do gas price expectations impact consumer behavior?

Let’s start with the upcoming holiday weekend. Less than half (43.3%) of Adults 18+ indicated that increased gas prices will impact their spending for Memorial Day, down more than 10 points from last year (53.7%) when gas prices were more than 30 cents higher on average. This is on par with May of 2007 (43.2%) when gas prices were $3.10 on average and below May of 2008 (56.4%) when prices were $3.66 per gallon. What a difference a few years can make; $3.10 per gallon would feel like a clearance sale at this point.

Note: The EIA gas price data is from the first week of each month which corresponds with the timing of the survey collection.

What do consumers expect prices to be by the time the holiday weekend has passed? On average, Adults 18+ anticipate that prices will be $3.95 by the end of May. Consumers have lowered their expectations after an increase in April ($4.17). While this is still above the $3.79 average expectation the EIA recently released, it’s important to note that they announced their new forecast on May 8, 2012, the same day we completed fielding the Monthly Survey. Stay tuned for June to find out if consumer expectations continue to lower and if these decreasing pump price forecasts help boost their confidence in the economy after it fizzled in May.

Why all this talk about expectations for gas prices? Do they really matter? In the April BIG Call, we learned that the answer is yes. When gas prices exceed consumer expectations, they make changes quickly. The chart below shows the percentage of consumers who said they are driving less because of gas prices compared to actual gas prices. From February to March of 2012, we see a more than ten point jump in those who are thinking twice before putting their foot on the gas pedal. While there was a 30 cent upswing in the average gas price during this time, the percentage who were driving less remained flat from March to April when prices increased 15 cents per gallon. Wouldn’t we expect to see some sort of increase in consumers driving less often in April if the 30 cent upswing in March had such a dramatic effect?

After taking a closer look, we came across a BIG insight. The differentiating factor from February to March is that gas prices exceeded consumer expectations. In February, consumers had only expected gas prices to be $3.69 per gallon by the end of the month. By the first week of March, they were at $3.85 per gallon. So, the consumer expectation was below the actual gas price. In March, consumers had an expectation of $4.08 per gallon by the end of the month and prices were only $4 per gallon by the first week of April. The expectation was higher than the actual price.

 *The actual gas price data is from the first week of the following month.

To keep a pulse on how gas prices and other economic issues are impacting consumers, sign up for the Consumer Vital Signs InsightCenter™.

Source: BIGinsight™ Monthly Consumer Survey – MAY-12 (N = 8789, 5/2 – 5/8/12)

© 2012, Prosper®

BIGinsight™ is a trademark of Prosper Business Development Corp.

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Pain at the Pump: At Least Gas Prices Aren’t $5/Gallon… Yet

With gas prices like this, who needs really needs a vehicle? A question I’m sure a lot of us have been asking ourselves lately…

Unfortunately, public transportation isn’t always an option and I know the 20 mile bicycle ride to work doesn’t sound like fun to me. (Maybe I’ll change my mind if prices hit the scary expectations for the summer.) So what other changes are consumers making as prices continue to creep upward?

Taking fewer trips, shopping for sales more often, shopping closer to home, and using coupons more are the most recent top responses from consumers when asked what they are doing as a result of fluctuating gas prices. While taking fewer trips, shopping for sales, and shopping closer to home haven’t quite reached the summer of ’08 levels (yet), using coupons more often has certainly remained a popular response, peaking at 42.1% in September 2011.

As a result of fluctuating gas prices, are you doing any of the following?

The dark blue line in the chart shows the actual average gas prices for the first week of each month according to the Energy Information Association.

When comparing these responses to actual gas prices, there is one obvious visual trend to make note of. When gas prices dropped from an average of $3.54/gallon in October 2008 to below $2/gallon in December 2008, the percentage of consumers who were taking fewer shopping trips, shopping for sales more often, shopping closer to home, and using coupons more did NOT take a drastic decline like the prices at the pump did. Instead, after just being slapped in the face by the realities of the recession, consumers began to adjust to the “new normal.”

What will these numbers look like at $5/gallon? Stay tuned and we just might find out (eek!).

To learn more about how consumers are being impacted at the pump and other economic indicators, check out the Consumer Vital Signs InsightCenter™ at www.ConsumerVitalSigns.com.

For more information on this data, please contact BIGinsight™.

Source: BIGinsight™ Monthly Consumer Survey – MAR-07 – FEB-12 (FEB-12: N = 8716, 2/1 – 2/8/12)

© 2012, Prosper®

BIGinsight™ is a trademark of Prosper Business Development Corp.