How Americans Are Spending Their ‘Reverse Tax’

I read an interesting article today from a financial newsletter that I subscribe to, Money and Markets. In the article, Jon Markman, looks at what Americans are doing with the extra money that we are saving at the pump.

Saving it or spending it? In typical American fashion we are spending it, but where? Of the $24.4 billion saved most of it has been spent on cars and restaurants/bars. Restaurants are 2nd to cars by only 1/100 of a percent, up over 8% vs a year ago. Restaurant stocks are up over 25% in the last 4 months.

Here’s the full article:

Economists and investors are dying to know what consumers are doing with their gasoline savings windfall. Will they save it, invest it, or upgrade their mobile phones?

To answer this question, the data analysts at Bespoke Investment Group first determined how much the windfall is. I won’t bore you with all their calculations but basically they determined a total consumption figure then divided by the monthly gasoline retail price and compared last year’s level with this year’s level.

They figure that roughly $24.4 billion has been saved at the pump since gasoline prices have been falling. And of course that does not include the “perceived” savings to the collective consumer psychology, as studies have shown that there is a multiplier effect in which a single dollar saved ends up feeling like several dollars earned. This is why consumer confidence figures soar disproportionately from a decline in gas prices.

Anyway, of that $24.4 billion saved, Bespoke figures that $21 billion has piled up since October alone, when the gasoline price plunge really got rolling.

So what have you Americans been doing with your “reverse tax”? Contributing to charities? Saving and investing for the future? No —

You, my fellow Americans, have been eating more. And drinking more. And buying more gas guzzlers. Congratulations, you are blowing your windfall.

According to Bespoke data, which comes from government sources, spending on cars and restaurants are up 8 percent vs. a year ago, and 4 percent more on sports and hobbies. So basically you are spending your extra $24.8 billion on burgers and fries, new wheels, and having fun.

The stock group that has benefited most are restaurants, with Wendy’s(WEN), PolloLoco (LOCO), Sonic (SONC), Jack in the Box (JACK) andCosi (COSI) performing best this year, up 10 percent to 76 percent. As a group, restaurants have surged 25.6 percent over the past four months. That is a huge gain in a short period, so you don’t want to pile in now. But it’s a good concept to put in your back pocket for the next time there is a consumer spending windfall of any kind.

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