Experian-Gallup Survey Shows Higher Gas Prices Are Financial Hardship for Lower-Income Consumers

Half of all consumers (51 percent) say higher gas prices this year compared with last year have caused them financial hardship, according to the Experian-Gallup Personal Credit Index(SM) survey for the second quarter (April, May and June) of 2006. As might be expected, higher gas prices have had a disproportionately greater impact on lower-income households. Sixty-five percent of lower-income consumers (incomes of less than $40,000 a year) and 54 percent of those earning $40,000 a year but less than $75,000 annually say that today’s higher gas prices are causing them financial hardship. Thirty-two percent of those making $75,000 or more say they are experiencing financial distress as a result of higher gas prices. Three in four of all consumers (74 percent) say today’s higher gas prices compared with those of a year ago are more of a permanent change than a temporary fluctuation in price.

“Given the sharp increase in gas prices at the pump over this past year, it is not surprising that many consumers say they are experiencing financial hardship as a result,” said Ed Ojdana, group president of Experian Interactive(SM). “What may not be getting enough attention, however, is the burden today’s gas and energy prices are placing on lower-income households.”

Nearly two in three of all consumers (64 percent) say that as the cost of gas, electricity and other energy sources has risen across the country, they have felt the need to cut back on their other personal discretionary spending. Seventy-five percent of families with incomes of less than $40,000 a year and 68 percent of households making $40,000 a year but less than $75,000 annually say they have had to curtail other spending due to the high cost of gas and energy prices. Close to half (48 percent) of families earning $75,000 or more also have cut back on their spending.

Optimism about one’s credit situation as measured in the Personal Credit Index also is highly correlated to household income. The Experian-Gallup Personal Credit Index is 85 for July 2006. The Personal Credit Index for those with annual household incomes of $75,000 or more is 136 for July. Conversely, among those reporting household incomes of less than $40,000, the Personal Credit Index is only 39, and for those reporting an annual household income of $40,000 but less than $75,000, the Personal Credit Index is 88 for July.

“Nearly half of consumers making less than $40,000 say they have cut back on food and other necessities due to higher gas and energy prices, which is clearly bad news for the retailers and small businesses that serve them,” said Dennis Jacobe, chief economist for The Gallup Organization. “While far fewer — 14 percent — of those making $75,000 or more are similarly affected right now, if gas prices remain high or go even higher this summer, it is hard to see how we are going to avoid a recession later this year.”