Gas prices have fallen considerably in the past 12 months but consumers aren't spending that newfound cash. Jeanne Yurman reports.
Tumbling gas prices equate to virtual pay raises. But many Americans don't seem to be spending that that new found cash. Retail sales have been relatively flat and the savings rate is up. So what gives? Behavioral economist, Dan Ariely at Duke University, says it's a phenomenon called loss aversion. (SOUNDBITE) DAN ARIELY, PROFESSOR OF PSYCHOLOGY AND BEHAVIORAL ECONOMICS, DUKE UNIVERSITY (ENGLISH) SAYING: "When the prices go up, we experience a very strong loss aversion, and we worry, and we are upset, and we do all kinds of things, amazing stories about what people do when the prices go up. When the prices go down, they don't have the similar effect on us, we just don't feel as good as we would have felt bad, and, therefore, we don't do much on the upside of that." He says spending, in general, is more connected to our psychological well being than our financial well being. And since the financial crisis, psychologically we're a little spent. (SOUNDBITE) DAN ARIELY, PROFESSOR OF PSYCHOLOGY AND BEHAVIORAL ECONOMICS, DUKE UNIVERSITY (ENGLISH) SAYING: "2007, 2008 were a shaking of the confidence in the market, and, I think, confidence has not really been regained since then. I think, our confidence in the government, the confidence in financial institutions, the confidence that there is some kind of certain future out there has been diminished." But some experts point to a surge in consumer discretionary stocks as one sign that our blues may be abating. Bankrate.com's, Chief Financial Analyst, Greg McBride. (SOUNDBITE) GREG MCBRIDE, CHIEF FINANCIAL ANALYST, BANKRATE.COM (ENGLISH) SAYING : "You know, stocks move in advance, not necessarily in response to, you know, the economic indicators. You know, stocks anticipate what's coming, and, I think, what you're seeing is a reflection in those prices that, you know, for the consumer, things are getting better, they are looking up, and that the consumer is going to have a little more buying power later in 2015 than they have at beginning of 2015." U.S. economic growth depends on America being in better spirits. Consumer spending drives two-thirds of it. Ariely says for now low gas prices are only a happy pill of sorts. To spend more freely over the long term, Americans will need sustained optimism about jobs and the government overall.