Archives for May 2011

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High gasoline prices have not derailed the economic recovery, but that’s small comfort to Loraine Greene. A customer relations manager in the Hudson Valley of New York, Ms. Greene spent the weekend packing up to move to a rental house much closer to work.

At $4 a gallon, gas is too expensive to justify the 50-mile round-trip commute.

“The option was either to sell my truck and get something smaller, or to try to get closer to work,” said Ms. Greene. She chose to move. The new house is just eight miles from the office.

Economists say steady job growth over the last three months, as well as this year’s federal payroll tax cut, have offset the downward pull of rising energy costs on the economy as a whole. But like a lot of economic news these days, what looks good on paper does not feel good for Americans still digging their way out of the recent recession.

At a True Value hardware store in Wilmington, Del., customers stressed by the cost of filling their tanks are buying more replacement parts for wheelbarrows and lawn mowers instead of buying new equipment.

In the San Francisco Bay area, the daily number of cars driving across the Golden Gate Bridge has dropped while passengers on the buses and ferries have risen.

“If all your customers are paying $50 for a tank of gas that they used to pay $25 for, somebody is not getting that $25,” said William Dunkelberg, chief economist for the National Federation of Independent Business.

According to a recent survey, one in four small businesses cited weak sales as their No. 1 problem.

Although gas prices have eased slightly in recent weeks, they are, on average, up about 30 percent over a year earlier. High oil prices have also driven up prices of food, airfares and even taxi rides in some regions, diverting consumers from other purchases.

The nation’s largest retailer, Wal-Mart, which reported earnings on Tuesday, said high gas prices had restrained its shoppers, and its business. Sales at stores open at least a year fell by 1.1 percent in the first quarter, as visits to stores in the United States declined.

“Our customers are consolidating trips due to higher gas prices,” said Bill Simon, who oversees the United States business. It was the eighth consecutive decline in same-store sales at Wal-Mart.

Lowe’s, the home improvement chain, which reported a 5.7 percent slide in quarterly profits on Monday, said its traffic was down 3.4 percent in the quarter as customers made fewer trips.

“Rising gas and energy prices are cited by homeowners as the top factor affecting future spending plans, followed by the state of the overall economy and inflation in general,” said Lowe’s chief executive, Robert A. Niblock, explaining earnings that missed analysts’ expectations in a conference call with investors.

MasterCard Advisors’ SpendingPulse, which researches consumer spending, reported on Tuesday that the gallons of gas pumped nationwide in the last month fell by 1 percent from the period a year ago.

Conserving miles has become a new business priority at Topical BioMedics, where Ms. Greene works in Rhinebeck, N.Y. Her boss, Lou Paradise, recently invested in cloud computing so employees could access documents and programs and work from home more. He hands out gas cards as bonuses and birthday gifts, and holds seminars on how to make a car more energy-efficient. And when employees have to drive somewhere on business, he urges them to use the company cars — a Volkswagen TDI, a clean-diesel car and a Ford Transit Connect van, which is relatively fuel-efficient.

Other companies are also trying to help workers cope with high gas prices. Robert Trow, who runs a small distribution company in Mashpee, Mass., recently gave his employees a raise — on top of the one he gave in December — to help them deal with pump prices.

At the hair products business Paul Mitchell, which is based in the Los Angeles area, the company gives employees 20 cents a mile when they carpool, and covers bus fare in full. More employees are taking the company up on the offers now. Even the chief financial officer, Rick Battaglini, has begun carpooling to work.

Over all, the economy, though still slowly mending, has largely been able to shrug off the effects of high gas prices. Since the beginning of the year, employers have added more than 750,000 jobs, which puts more money into the economy in the form of additional paychecks.

And while the rise in gas prices since the beginning of the year roughly translates into a loss of $75 billion to $100 billion in spending power if sustained for the entire year, the payroll tax cuts adds back about $112 billion, according to an analysis by Credit Suisse.

“It looks like those two things have fought each other to a standstill,” said Neal Soss, chief economist at Credit Suisse.

Some have benefited from the higher gas prices. Online sales boomed in April as shoppers stayed home on weekends, clicking a mouse instead of driving a car. E-commerce sales grew 19.2 percent in April compared with a year earlier, the biggest increase since July 2007, according to SpendingPulse.

Car sales have also risen recently as consumers choose smaller cars. In April, vehicle sales rose 18 percent, as shoppers turned toward compact and fuel-efficient models like the Chevrolet Cruze, Ford Fiesta and Focus models, and even electric cars like the Nissan Leaf.

Tom Veasey, owner of the True Value in Wilmington, said that customers had been grumbling to cashiers about the high cost of driving, and those who might previously have traveled five miles to a Home Depot were now shopping in his store. But total sales were still flat, he said, as an increasing number of customers replaced parts rather than bought new gear.

“A new wheelbarrow is $59.95” and they can get a new tire for $20, Mr. Veasey said. “When things are going good they will just buy something new and save themselves the time it takes to repair something.”

Airlines and hotel companies say that improvements in the broader economy are helping them continue to sell tickets and rooms. A Gallup poll released on Monday showed that more than six in 10 Americans planned to take a vacation away from home this summer, although they expected to pay more for transportation costs than last year.

Henry Harteveldt, travel industry analyst at Forrester Research, said he had detected a deceleration in advance reservations. “The booking path has been slowing down,” he said. “We’re now getting into the heavy intense period for summer vacation planning and there is concern among hotel operators that because gas prices are higher whether the customer is flying or driving, there will be less discretionary budget to spend” on things like restaurants, entertainment and other businesses that rely on travelers. For now, analysts expect oil prices to level off rather than shoot higher. But if the recent softening reverses and gas prices go higher, economists suspect that more consumers will react.

“There is some point where people may get a little more panicky about it rather than simply adjusting to it,” Mr. Soss said.

By MOTOKO RICH and STEPHANIE CLIFFORD