While gas savings are having a positive impact on consumer spending, fashion apparel is lagging slightly behind other product segments according to the latest read from The Retail Economist-Goldman Sachs Weekly Chain Store Sales Index.
The index rose 0.7 percent for the week ended Sept. 5 compared to the prior week. On a year-over-year basis, the index showed a 1.8 percent gain.
Michael Niemira, chief economist of The Retail Economist, said results were mostly affected by a calender shift for Labor Day, which was one-week later this year. “Lower gasoline prices continue to be a supporting factor for consumer discretionary spending, especially at jewelry stores, and home furnishings and furniture stores.”
Currently, the average price of a gallon of gas is 30 percent lower than a year ago. And the price is down 17 percent in the 10-year period. At the midday trading session, the price of crude oil was down 2 percent to $45.01 a barrel. Crude oil prices have been under intense selling pressure over the past few months due to concerns of an oil glut in the global market.
Last year, the Organization of Petroleum Exporting Countries (OPEC) decided not to reduce production. As a result, production is now outpacing demand. Adding to the glut was an increase in U.S. shale oil production over the past year. It’s unclear how long cheap gas will last. Analysts and economists are divided on the outlook with some seeing a jump back to year-ago prices within the next six months.
For now, cheap oil means better margins for companies making synthetic fibers. And for fashion apparel retailers, the challenge is to get shoppers to switch their spending to clothing instead of home goods. But several companies have recently discovered that having the right fashion offering at the right price point is boosting sales of apparel and accessories. Denim is also making a strong comeback, and retailers such as American Eagle Outfitters Inc. have leveraged the trend well.