'Stimulus' Goes to Food and Fuel
For the 12 months ending August 1, consumer prices for fuel and food increased $132.4 billion, and stimulus checks have been used for debt reduction instead of discretionary spending, according to recent analysis.
"Every sustained one-cent increase in fuel prices takes $1.7 billion a year out of U.S. consumers' pockets for other spending," says Greg Buzek, president of IHL Group, an analyst firm and consultancy that serves retailers and technology vendors. "These are sales lost to non-fuel retailers, restaurants, auto dealers and other businesses due to the increase in fuel prices. Or put another way, sales lost to the retail economy in the past year due to a sustained rise in gas prices equates to the combined annual revenues for Kroger and Target."
According to IHL, the increase in fuel costs has been devastating for retailers, casual restaurants and auto dealers. However, things are beginning to look up for retailers, as the drop in fuel prices over the past 45 days comes during the critical back-to-school season.
"The timing is actually very good for retailers and should help back-to-school sales by releasing over $3.4 billion for consumers for non-fuel activities," added Buzek. "Those retailers that have adjusted their inventories and coordinated their marketing accordingly are best positioned to benefit."
From the September 2, 2008, Prepared Foods e-Flash