Gas at $4: Americans cut back on discretionary spends as fuel bills mount
Behavioral changes observed so far are mild, such as changing gasoline purchasing routines and fewer visits to clothing and furniture stores. They are also unequal across the population. In recent earnings calls with analysts, executives at American majors like Walmart, McDonald’s and Dollar General cited overall shopping flexibility as well as apparent disruptions to lower-income customers.
But new signs of tension being cited by major retailers as generous income tax rebates helping boost their sales have led some economists and analysts to think they will see broader cuts once the rebates end and consumers face the cumulative impact of more expensive gasoline and higher prices on food, clothing, insurance and other goods and services.
Trevor Chapman, a communications manager in West Hills, Calif., said he and his wife now plan their fuel stops around Costco stores that have fuel stations, rather than going to a local independent gas station. He said the couple was also shopping for more groceries online to avoid impulse buying.
“Gas is a type of catalyst,” Chapman said. “It’s reflected in the entire budget. We’re trying to keep things as normal as possible. But we’re starting to feel it’s getting bigger and bigger.”
Long before the United States and Israel started the war, many consumers, exhausted by years of persistent inflation and last year’s tariffs on imported goods, were becoming more selective in their discretionary purchases.
The U.S. Commerce Department reported last week that much of the increase in Americans’ spending in April, when a key inflation gauge hit the highest level since October 2023, was due to higher prices, not more buying.
stuffing instead of stuffing
Members-only warehouse stores like Costco, Walmart’s Sam’s Club and BJ’s Wholesale Club have seen more traffic at fuel pumps since the battle began in late February, according to the companies. Fuel is often cheaper at wholesale clubs.
But many drivers are not filling up their tanks, Walmart Chief Financial Officer John David Rainey told analysts late last month. Walmart said its customers and Sam’s Club members bought an average of less than 10 gallons of water per trip for the first time since 2022.
“This is an indicator of stress,” Rainey said.
Costco members are making changes, too. Chief Financial Officer Gary Millerchip said in late May that they are visiting store gas stations more frequently “to bridge the gap between normally emptying the tank because of concern about what the price of gas might be tomorrow.”
Meanwhile, the increase in gas prices has hurt convenience stores, where 80% of all fuel is sold in the United States, according to Jeff Lenard, vice president of the National Association of Convenience Stores.
A sales analysis by the trade group found that the number of pump transactions at the properties of 130 convenience store companies fell nearly 10% in March and April compared to the same two months last year. According to the analysis, there was a 10.4% decrease in the number of sales in the companies’ stores.
“When you lose gallons to the big box, you lose in-store sales,” Lenard said.
Changing eating habits
High gas prices did not stop many Americans from eating out during the first two months of the war with Iran. The National Restaurant Association said tax rebates are helping. Customer traffic at U.S. restaurants in April was unchanged from the same month last year, although the 2.6% increase in restaurant spending was largely due to higher menu prices, according to market research firm Circana.
But cracks are starting to appear as budget-conscious U.S. residents shoulder the overall weight of paying more for gas and other consumer goods, as well as rising costs in other areas due to past and present inflation.
The price of gasoline won’t help customers with household incomes of $45,000 or less return to U.S. fast food restaurants, McDonald’s Chairman and CEO Chris Kempczinski said last month. People in this income group began to reduce their fast food purchases following the period of inflation that came with the end of the COVID-19 pandemic, and this trend accelerated last year.
US-based restaurant consulting firm Revenue Management Solutions analyzed 14.6 billion restaurant transactions over the last four years and found that restaurant visits are gradually decreasing as gas becomes more expensive, according to Chief Research Officer Sebastian Fernandez. The analysis showed that the impact doubles if gas reaches $4 on average nationwide on March 31.
According to Stew Leonard, president of Stew Leonard’s, the eight-store supermarket chain founded by his father, consumers also make compromises when shopping at the grocery store. He found that customers were buying meat in bulk to freeze and were less willing to purchase items displayed or offered for sampling during live cooking demonstrations.
“This tells me that people are sticking to their shopping lists more,” Leonard said.
Dollar General CEO Todd Vasos also cited $4 per gallon as a turning point as more consumers with household incomes over $100,000 frequent the discount chain. Vasos told analysts Tuesday that many of Dollar General’s core customers who live in middle-to-low-income and rural areas are cutting back on food spending.
Sophie Tolsdorf, 29, of La Grange, Kentucky, said she is one of those consumers who stock up on meat when the price is reasonable. She also started buying whole fruit instead of cutting and rawhide bones from pre-cut fruit for her dog, which costs $40 per package.
“He might have noticed,” Tolsdorf said. “He definitely gets a little bored during the workday now.”
Needs versus wants
Before the war, retailers had had many earning seasons highlighting consumers’ wariness and selectivity as factors that could negatively affect sales of non-essential products. Marshal Cohen, Circana’s chief retail consultant, said shoppers are further cutting back on discretionary spending as the cost of purchasing gasoline rises.
Between April 25 and May 23, U.S. retailers sold 6% fewer non-food items compared to a comparable four-week period in 2025, Cohen said. Household goods, clothing, shoes and sporting goods experienced the biggest declines of 5% to 7%. Circana reported that toys and beauty products continued to be bright spots, posting at least an 8% increase in the number of units sold.
Location intelligence company Placer.ai, which tracks people’s movements based on cellphone usage, saw visits to gas stations at BJ’s, Costco and Sam’s Club stores begin to accelerate in early March, in line with a sharp increase in fuel prices, according to RJ Hottovy, the company’s head of analytics research.
In early May, data from Placer.ai showed four consecutive weeks of decreased foot traffic at clothing, electronics and home furnishings stores and more trips to grocery stores and dollar stores.
“Consumers are prioritizing value-oriented retailers like warehouse clubs, supermarkets and off-price chains,” Hottovy said.
