Economics: A Beautiful Combination

(Drivebycuriosity) - It looks like that the US economy is getting a new boost which could cause a rebound of the global economy this year.  This assumption is based on two trends: Last Friday we learned that the US job market is getting stronger and wage growth is accelerating (chart below ). US salaries are now climbing 3.2% p.a., encouraging consumer spending.

(calculatedrisk )

This trend is supported by a second movement: Oil prices dropped about 40% since October, which translated into falling gasoline prices (green line in the chart below). Today gasoline at US pumps costs 11% less than lat this time last year  ( aaa.com ). Fall oil & gasoline prices work like a tax cut: Consumers have more money in their wallets and can spend more for other goods & services and companies have lower costs. I suppose that oil & gasoline prices will stay subdued in 2019 & 2020 thanks to the rising US oil production & fracking. Cheaper oil will translate into lower inflation rates - towards 2% in the US - which will allow the Federal Reserve to slow her interest rate hikes (maybe even to pause them) and will give China´s monetary authorities the chance to reduce their interest rates.  

 ( fuelinsights )

Rising wages & falling expenses for gasoline create a beautiful combination. Americans have significantly more disposable income which will boost retail sales and other forms of consumer spending in the US and could - via stronger imports - reaccelerate the global economy.