The trends in gasoline prices haven’t gotten a ton of attention in the media, but on Wall Street people are starting to pay more attention.
Prices at the pump have been pretty benign this year, and there’s a belief (or at least a hope) that this is going to provide some level of economic stimulus.
Deutsche Bank’s Joe LaVorgna notes:
Gas prices provide a gentle nudge: Earlier this year, as geopolitical tensions were heating up in the Middle East — particularly in Syria — we highlighted the potential economic damage which could be inflicted if energy prices surged. We noted at the time that gasoline prices were actually providing modest stimulus to consumers, but we doubted it would last if the situation escalated into a military operation. In fact, the diplomatic resolution and subsequent drop in oil and gasoline prices has led the implied “energy-stimulus” to endure, which may be part of the reason household spending has shown resilience in the face of recent declines in consumer attitudes.
Yesterday, Rob Wile wrote about the latest analysis from Macroeconomic Advisers, which had this to say about the impact of falling gasoline prices:
Falling energy prices are contributing to gains in real wealth and income: Retail gasoline prices have declined more than 30 cents / gallon over the last two months, to $US3.28/gallon as of Thursday, according to the national average pump price compiled for AAA. November gasoline futures have declined by a similar amount. We estimate that the CPI for gasoline declined by roughly 3% to 4% in October, after seasonal adjustment. If retail prices hold near current levels, the CPI for gasoline in November would be roughly unchanged after seasonal adjustment. Over the last eight weeks, the spot price of WTI has declined approximately $US15 to near $US95/barrel.
So while the economy is pretty meh, this is providing some hope.