Attention, Attention: Consumers Respond Meticulously To Price Hikes

Not to be fooled, consumers are constantly tracking price changes on an assortment of items, according to a new study published by the American Economic Association.

Authors Scott Baker, Stephanie Johnson and Lorenz Kueng tracked 150,000 households across 40 states and 3,000 municipalities and found that consumers adjusted their spending patterns in response to increases in sales tax. They even prepared for the hikes.

Households stocked up on durable goods — including things like laundry detergent and alcohol — while they were less expensive. They also stocked up on goods that were tax-exempt, attempting to make fewer trips to stores in order to save time and money on gas.

Most of the benefits consumers accrued were in the short term, eventually having to experience paying more for products that maintained a higher sales tax.

In part, the authors found that sales taxes — and even the threat of sales taxes — boosted immediate spending in the economy, as consumers were diligently working to save for the future.