Streaming is more vulnerable than gasoline as consumer wallets tighten
July 9, 2024
Key Observations:
Ahead of Thursday’s U.S. CPI report for Jun-24, it is timely to revisit our Hulu Ooops framework. This analysis situates the vulnerability of consumer wallets to inflation by mapping real retail gasoline expenses to U.S. disposable personal income (DPI). A snapshot visual of the data instantly reveals how less stressful current real gasoline prices are relative to the experience of the 1970s or even that of the 2010s (chart).
The 2024 observation as of Feb-24 marks the third lowest for gasoline expense share of DPI since our sample begins in 1959 (n=65 years). The gasoline price advance from Feb-24 through May-24 lifted expense as share of DPI from 2.2% to 2.4%. The strain is still lower than in any year between 2000 and 2023, excepting the pandemic-driven lock-downs in 2020 and 2021. Politicians fretting about “kitchen table” economics should grasp this anxiety still centers on food, of course; but in the 2024 calculus of budget worry, Hulu replaces HU1 (historic NYM ticker for unleaded gasoline futures).
Turning to the imminent CPI report, the average U.S. retail price for regular grade gasoline was $3.47 per gallon in June down from $3.61 in May, according to AAA. To be clear, this average price has already recovered to $3.51 in July. But Thursday’s CPI report most likely shows -3.8% MoM. All else equal, this specific contribution is bullish equities.
Source: AAA, BEA, BLS, EIA, Federal Reserve, Blacklight Research. * DPI = Disposable Personal Income. Note: in the twelve months ending 31-May-2024, an average retail price of $6.95 per gallon would have been required to lift gasoline expense to 4.5% of DPI (an annual value last exceeded forty-one years ago, in 1983). In real terms, the 2024 observation as of Feb-24 marks as the third lowest for share of DPI since our sample begins in 1959 (n=65 years). The only lower years are 1998 (Asian Financial Crisis) and 2020 (COVID-19 pandemic). As of May-24, gasoline expense share of DPI has increased to 2.4%. This observed value still falls below all observations for the past 20 years excluding the pandemic-affected 2020 and 2021. See: Blind Side, US retail gasoline soon back to $3.33F (13-Feb-2024), On taking the under and the over (7-Mar-2024), and Hulu Ooops (8-Apr-2024).
(13-Feb-2024), On taking the under and the over (7-Mar-2024), and Nugget: Hulu Ooops (8-Apr-2024).
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