Gas Prices Squeeze Consumer Spending Despite Tax Refund Boost

In April, U.S. shoppers reduced spending due to soaring gas prices resulting from the Iran war, affecting nonessential purchases. Despite still healthy consumer spending thanks to tax refunds, economists worry it may dip as the gas price impact intensifies. Retail sales rose but at a slower pace than March.

In April, Americans curtailed their spending as gas prices surged in the wake of the Iran war, leaving less money for nonessential items like clothing and furniture. While consumer spending remains healthy due to generous tax refunds, economists warn that it might decline as the gas price pinch continues to hurt wallets.

Retail sales saw a modest rise of 0.5% in April, a deceleration compared to the previous month's revised growth of 1.6%, according to the Commerce Department. The reduced spending followed a historic March increase driven largely by a sharp rise in gas prices, which overshadowed spending on other goods.

The ongoing conflict in Iran has resulted in the closure of the Strait of Hormuz, cutting off a significant portion of the global oil supply, further exacerbating gas prices. This, coupled with dwindling tax refunds, poses a challenge to consumer spending in the coming months, experts predict.