Election Day is still seven months away, but President Barack Obama may have no more than four months to reverse the impact of high gas prices on how voters feel about his economic stewardship, if the conclusions of a pair of economics and finance professors from two Maryland universities are correct.
The professors compared 30 years of data on fluctuations in consumer sentiment and the price of gasoline and found that, while motorists feel the pain at the pump immediately when gas prices rise, changes in consumer sentiment actually lag gas prices by three months.
Dr. Douglas J. Lamdin, associate professor of economics at the University of Maryland, Baltimore County, and Dr. Mark A. Johnson, assistant professor of finance at Loyola University Maryland, looked at more than thirty years of consumer sentiment data and analyzed the relationship between changes in gasoline prices and its impact on consumer sentiment.
In an article to be published in a forthcoming edition of the Journal of Applied Business and Economics, Lamdin and Johnson wrote that “changes in gasoline prices leads consumer sentiment and changes in consumer sentiment for 3, 6 and 12 month periods,” although the connection is clearest at 3 months.
“Changes in gasoline prices clearly affects consumer sentiment, and more clearly than does disposable income,” Lamdin and Johnson said.
“Our conjecture about this finding is that gasoline prices are salient to practically all consumers, particularly abrupt changes in prices. Changes in aggregate real disposable income are more gradual, and result in large part due to economic recessions and expansions that may have a strong impact on those individuals who lose or gain employment (income) at those times, but those individuals will not make up a large portion of those sampled to crease the sentiment index.”
With gas prices above $4 now in much of the country, and expected to stay high throughout the summer, there may be little Obama can do to change how consumers feel about the economy and Obama's handling of it.