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Drop in gasoline prices fails to boost economy

Analysts hope for better retail news this summer
By MARTIN CRUTSINGER Published: June 14, 2012

Cheaper gas has yet to cause consumers to spend enough on other goods to boost the slumping economy.

Americans barely increased their spending at retail businesses this spring, leading economists to predict slower economic growth in the April-June quarter.

But the news from a spate of government data Thursday wasn't all bad. Consumers spent more in May on cars, appliances and furniture — big purchases that help drive growth. Businesses continued to restock this spring at a healthy pace.

And wholesale prices outside of gasoline costs remain stable, which means consumers can expect inflation to stay mild.

If gas prices stay low, Americans are likely to spend more freely this summer on other goods, from autos and furniture to electronics and vacations, that fuel economic growth. Gasoline purchases tend to provide less benefit for the U.S. economy because some of the money goes to oil-exporting nations.

“The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items,” said Paul Dales, senior U.S. economist at Capital Economics.

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