Changes in Gasoline Prices and Consumer Sentiment

Volatile gasoline prices are frequently mentioned in the press. Using more than thirty years of consumer sentiment data, we analyze the relationship between changes in gasoline prices and its impact on consumer sentiment. We find a negative relationship between changes in gasoline prices and its impact on consumer sentiment, suggesting that as gasoline prices rise (fall), this negatively (positively) impacts consumer sentiment. Additionally, causality analysis provides support that changes in gasoline prices leads consumer sentiment and changes in consumer sentiment. Our results are consistent with the documented fact that the demand for gasoline by consumers is inelastic in the short-run