The drop is helping to boost consumer spending on other goods, lifting retail sales last month by 0.3 percent. Lower gas prices showed up in the numbers as a 1.5 percent drop in receipts at gasoline retailers. Consumers are spending those savings on other products and services; among the gainers last month were clothing and sporting goods.
"(Lower oil prices are) going to be a big boom for consumer spending," said Frank Holmes, CEO and CIO at U.S. Global Investors.
But the added spending power from lower pump prices is being tempered by higher costs for food, which make a much bigger share of overall spending. Food prices are up 2.9 percent in the year ended in September, according to the Labor Department. While the average household spends 5.3 percent of income on gasoline, food accounts for 51.3 percent of spending.
Consumers are also getting some help from a stronger dollar—up more than 10 percent since June—which boosts Americans' spending power when they buy goods made overseas. The Labor Department said import prices fell 1.3 percent in September, the biggest drop in more than two years.
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More spending power is translating into higher consumer confidence, based on a widely watched survey by the University of Michigan, which hit an eight-year high in November.
"It shouldn't be a surprise that confidence is riding high when job growth is strong, equity prices are back at record highs and gasoline prices are plunging," said Paul Dales, an economist with Capital Economics. "Both the current conditions and expectations indices of this survey rose to levels not seen before the recession began in late 2006."