As soon as oil prices plunged in 2014, economists argued that American consumers would win big.
The thinking was that if folks were paying less money for gas, then they could either spend that money elsewhere or save it.
In a recent note to clients, Societe Generale’s Aneta Markowska shared a chart detailing just how Americans’ spending has changed since June 2014 (when oil was over $100 per barrel), as well as how spending changed since 2007.
Although US consumers have been saving a fair share of their newfound riches, Markowska estimates that households are now spending about two-thirds of the extra money from lower oil prices.
As for what they are spending that extra money on, Markowska writes, “we estimate that about 40% of the energy dividend has gone toward the healthcare sector, followed by restaurant sales and recreation.”
“The post-crisis consumer is more health-conscious and experience-seeking, favouring services over goods.”
On the flip side, the share of nominal disposable income spent on transportation dropped by about 1.4 percentage points and spending on housing (including utilities) fell by about 0.2 percentage points, according to SocGen’s estimates.
“Since these changes reflect price and not quantity effects, they effectively represent the energy dividend, worth 1.6% of disposable income,” writes Markowska.
One other thing that really stands out in the above chart is that the share of income allocated to clothing/footwear and furnishings/household equipment has declined in the last two years.
Or, looking at it from the point of view of businesses, this suggests that traditional retailers haven’t benefited from the lower-oil-price world.