Gas prices impact consumer spending

What happened: Gas prices, driven by geopolitical tensions, surged in early 2022. By April, they had reached $4/gallon, impacting consumer spending. Lower-income households were disproportionately affected, cutting back on discretionary items like clothing and beer. Home Depot reported resilient core shoppers, but beer sales and retail spending growth slowed. The Fed's Powell warned of potential hits to consumer wallets and economic growth.

Market impact: Higher gas prices squeezed lower-income consumers, hurting discretionary spending and convenience retail. Beer sales and retail growth slowed, impacting companies like Anheuser-Busch InBev and retailers reliant on discretionary spending. Food and fertilizer costs rose, pressuring packaged food companies like Kraft Heinz and General Mills. Home Depot, however, benefited from resilient homeowner spending.

What to watch next: On May 17, the EIA will release its Short-Term Energy Outlook, providing updated gas price projections. On May 18, the Census Bureau will report April's retail sales, offering insight into consumer spending's resilience. On June 1, the Fed's next meeting, Powell may update his outlook on gas prices' impact on consumer spending and economic growth.