In brief
The anticipated tax refund boost for the U.S. economy is threatened by soaring gas prices, driven by the ongoing Iran conflict. Economists now predict a slowing economic growth rate as households face increasing expenses on fuel. Lower and middle-income families are likely to suffer the most, feeling the pinch as their tax refunds fall short of offsetting the higher costs of living.
WASHINGTON (AP) — The effects of escalating gas prices in the U.S. economy are becoming increasingly pronounced, overshadowing expectations for a robust kick-off to the year due to predicted tax refunds.
President Trump's previous optimism about tax refunds expected to peak this spring has been dampened as prices at the pump reach an average of $3.94, more than a dollar increase in just a month. With the geopolitical tension surrounding the Iran conflict disrupting global oil supplies, consumers are facing a substantial financial burden.
The impact is particularly harsh on lower and middle-income households, which are predicted to receive smaller refunds while spending a larger portion of their earnings on fuel. Economists are now projecting slower overall growth for the remainder of the year as higher gas prices divert money from discretionary spending.
“The energy shock is going to hit those who have the least cushion,” remarked Alex Jacquez, a former economist in the Biden administration. “And it doesn’t look like those tax refunds are going to be here to save them.”
The price of gas could peak at $4.36 a gallon in the coming months, according to forecasts, which would cost the average household an additional $740 in fuel expenses this year, nearly matching the anticipated tax refunds of $748.
Consequently, some economists suggest that if gas prices remain high, they could negate the financial relief that households might have expected from tax season.
Despite a tightening economy, spending on non-essential items remains stable, showing consumer resilience. However, the continuous rise in fuel costs poses a long-standing challenge to discretionary spending and overall economic growth.
