Gas prices could cut sales at discounter, food, teen chains

With gas prices at record levels, retail analysts are worried that low-income consumers will cut their spending at discount stores such as Wall-Mart, fast food restaurants, and stores that market to teenage consumers. The concern is that as gas goes up low-income consumers will have less money to spend. Stores that are discounters', fast food restaurants or teen chains that cater to low-income consumers might have a highly noticeable drop in consumer spending which could be detrimental to their businesses. Low-income consumer spending tends to be highly elastic. If the price goes up for gas, then they'll spend more of their income on gas and less on items that are not necessities. This could also mean that they will begin taking alternative transportation to and from work. If low-income consumers begin taking alternative means of transportation to and from work, they might still have a little extra cash to spend at discounters', fast food chains, and teen chains. If this occurs then the rise in gas prices won't be as detrimental to the businesses that cater to low-income consumers. The article also goes over how higher gas prices will effect high-income consumers and their spending at high end retail stores such as Saks and Neiman Marcus. Higher income consumers tend to be inelastic in their spending so economists expect that consumer spending at high end retail stores will drop a tiny bit, but nothing too noticeable will occur.

It will be quite interesting to watch and see how the higher gas prices effect consumer spending in not only high end and low end retail stores, but also in the travel industry. Will the travel industry in the United States experience a boom as plane tickets to travel to Mexico and Europe sky rocket due to higher gas prices? Or will the travel industry in the United States also suffer due to higher gas prices?