Sunday, February 7, 2016

Economy: Falling Gas Prices - The Trigger For An Economic Rebound?

(Drivebycuriosity) - Gasoline prices are in a free fall. Today the average US gas price dropped to $1.744 -  gas costs now 12% less than last month and the fuel is about 30% cheaper than at begin of October (fuelgaugereport). It seems that the oil price collapse on the financial markets (futures for Brent Crude & Crude Oil)  reached the consumers.

The recent price drop is remarkable. Normally gas prices follow a seasonal cycle and start to climb in January because many refineries are using the weak winterly demand from January through March to shut down for their yearly maintenance. So, "in a typical year, prices at the pump are flat to modestly higher at this point", explains the research service Bespoke (bespoke).

The recent sharp drop of the gas prices could stimulate consumer spending and so the whole economy. And there are also tailwinds from the job market. Friday´s labor market report (151,000 new Jobs created in January, plus 2,650 in the whole year 2015) showed that hourly wages grew faster (monthly +0.5%) a plus of 2.5% compared to January 2015 (calculatedrisk).

The combination of falling gas prices (amplified by dropping heating costs thanks to cheaper natural gas and heating oil) and faster climbing wages could be the trigger to restart the sluggish economy.

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