Americans are facing a $50 billion headwind
Reuters/Mike Blake
Middle-income Americans are feeling more optimistic on the back of many of Trump's policies, like anticipated tax cuts, but this hasn't translated into a higher pace of spending and "not everyone is happy," according to the team led by Morgan Stanley Economist Ellen Zentner.
To understand the reason, Morgan Stanley points to the headwinds consumers are currently facing - notably the burden of rising gas prices.
Data provided by AAA shows the average gallon regular of gasoline costs $2.284 a gallon, up from $1.698 a year ago. According to Zentner, "Annualized that is about a $50 billion headwind to the consumer wallet." She continued, "Data from the Energy Information Administration show that gas prices rose by more than 30% year-over-year in the latest week. Seasonally adjusted they increased by 8% month-over-month in December and an additional 4% in January."
Energy Information Administration, Morgan Stanley Research
The main reason for the increase in gas prices is low supplies from refineries.
The first quarter of the year also marks "refinery maintenance" season. During the maintenance period, also known as "turnaround," a refinery process unit or plant experiences a periodic shut down to perform maintenance, overhaul and repair operations and to inspect, test and replace materials and equipment. The refinery maintenance period is usually accompanied by a further spike in prices due to the decreased supply.
In other consumer headwinds, Morgan Stanley cites the pace of wage growth not fully offsetting the slowing trend in job growth, leading to a slowdown in real disposable personal income.
The team does not expect this to be a long-lasting trend, however, and thinks that the delivery of proposed tax cuts later this year will stem the slowdown in income. The Tax Policy Center says Trump's tax plan would reduce the average American's tax bill by $2,940.
See Also: One of Wall Street's top equity analysts reveals his biggest fear for 2017
Visit Markets Insider for constantly updated market quotes for individual stocks, ETFs, indices, commodities and currencies traded around the world. Go Now!
- Some Tesla factory workers realized they were laid off when security scanned their badges and sent them back on shuttles, sources say
- I tutor the children of some of Dubai's richest people. One of them paid me $3,000 to do his homework.
- India not benefiting from democratic dividend; young have a Kohli mentality, says Raghuram Rajan
- Indo-Gangetic Plains, home to half the Indian population, to soon become hotspot of extreme climate events: study
- 7 Vegetables you shouldn’t peel before eating to get the most nutrients
- Gut check: 10 High-fiber foods to add to your diet to support digestive balance
- 10 Foods that can harm Your bone and joint health
- 6 Lesser-known places to visit near Mussoorie