Rising energy and food prices continue to stress the consumer's ability to spend disposable income and can derail the economy if things get much worse, according to James Frischling, president at NewOak Capital.
These increases in costs also pose a real risk to state budgets, which are already under significant pressure.
"Since the beginning of March, the American Automobile Association (AAA) reports an 18% increase in the number of service calls for people running out of gas," Frischling said. "This suggests motorists take the risk of driving on an empty gas tank in the hopes of finding a gas station with cheaper prices."
In addition to energy prices, the consumer is also facing the added financial stress of rising food prices which combined with the swelling gas of energy has some analysts concerned that the U.S. economy can be pushed into a recession.
According to estimates from Customer Growth Partners, food and energy account of about 15% of consumer spending at today's prices, compared to 12.7% two years ago.
"The price increases threaten the consumer's ability to spend disposable income elsewhere, so expect the financial strain on families and businesses to get worse," Frischling said. "These increases in costs present a real risk to derailing an already fragile recovery and they will also strain state budgets, which are already under significant pressure."
