Higher gas prices are crimping consumer spending and slowing the already-weak U.S. economy. And they could get worse in the coming months.
The Federal Reserve this week took steps to boost economic growth. But those stimulus measures are also pushing oil prices up. If gas prices follow, consumers will have less money to spend elsewhere.
The impact of the Fed's actions "is likely to weigh on the value of the U.S. dollar and lift commodity prices," said Joseph Carson, U.S. economist at AllianceBernstein. "We would not be surprised if [it] fueled more inflation in coming months, squeezing the real income of U.S. workers."
Americans are already feeling pinched by high unemployment, slow wage growth and higher gas prices.
Consumers increased their spending at retail businesses by 0.9 percent in August, the Commerce Department reported Friday. But that was largely because they paid more for gas. Excluding the impact of gas prices and a sizable increase in auto sales, retail sales rose just 0.1 percent.
Perhaps more telling is where Americans spent less. Consumers cut back on clothing, electronics and at general merchandise outlets -- discretionary purchases that typically signal confidence in the economy.
The Fed is hoping to kick-start growth with a series of bold steps announced Thursday that could make borrowing cheaper for years.
But the Fed's actions also helped send oil prices up. U.S. October crude, up 2.7 percent for the week, rose 69 cents to settle at $99 a barrel. U.S. crude reached $100.42, its first time over $100 since May 4 when it touched $102.72.
Higher gas prices are eating up a bigger share of Americans' incomes than in previous years. Spending at the pump accounts for 8.2 percent of the typical family's household income, according to Fred Rozell of the Oil Price Information Service.