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Cheap Gas Not Driving Consumers To Spend

Even cheap gasoline isn't enough to fuel consumer spending. In a recent consumer survey, 76 percent said they were not willing to spend more for non-essential goods and services even with a more than dollar per gallon decline in the price of gasoline in the last month.

Since mid-September, as news of the financial crises worsened, the U.S. consumer has been on a spending strike.

The survey, conducted late last week for the International Council of Shopping Centers and Goldman Sachs, shows that dropping gasoline prices spurred spending only modestly. Twenty-three percent of consumers did say they would spend more on things like consumer electronics, restaurants, apparel and jewelry. Yet, only 9 percent of the 1,000 questioned said they would spend considerably more.

Store sales data backs this up. For the first time in five years, the ICSC-Goldman Sachs weekly chain store sales snap shot shows that weekly chain store sales fell on a year-over-year basis. Sales, for the week ending Nov. 15, declined 0.1 percent compared to last year, and a slight 0.3 percent gain compared to the week earlier.

And of course, most retailers reporting earnings this week have shown that things are not good as the holiday season gets underway and are not likely to get better in the near future. Saks today posted a worse than expected loss even as it slashes prices to attract shoppers to its upscale stores. The company's CEO described consumers as being in "frozen mode," and Saks says it is not adverse to closing stores.

Wal-Mart US CEO Eduardo Castro-Wright, speaking at a Morgan Stanley conference, said that chain's traffic has actually been helped by falling gasoline prices. He said as gas prices rose this year, shoppers cut back on trips to rural stores, but as prices fell in October traffic increased to rural and urban stores. But Wal-Mart is one of the bright spots in the retail sector.

"One would think that you would get some lift from gasoline prices, but we argue that it's really offset by the contraction in employment," said Michael Niemira, ICSC chief economist.

"We're still in a pretty deep hole, and it will take a while to come out of it," he said. "The issue is whether this is the low or whether there is more downside."

For November, Niemira expects chain store sales to fall by 1 percent, but he said the comparisons for December get better. That, in part, is because Thanksgiving is so late in November this year. For December, he says comparisons could improve to a 1.5 to 2 percent increase.

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  • One factor that is helping the picture is the strength of Wal-Mart. Wal-Mart in October saw same store sales rise 2.4 percent, better than the 1.6 percent increase expected. But many store chains saw double digit declines.

    "We're still locked in that kind of pattern definitely for November. The Arithmetic is awful for November. A lot of the apparel and department stores will see big declines, anything from 5 percent to double digits," he said. "November is likely to be down 1 percent but it's worse beneath the surface. The only number it's not worse in the aggregate number is Wal-Mart," he said.

    Questions? Comments? marketinsider@cnbc.com

    • Patti Domm

      Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

    • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

    • CNBC Senior Commodities Correspondent and Personal Finance Correspondent

    • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

    • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

    • Senior Producer at CNBC's Breaking News Desk.