{"id":7224,"date":"2016-01-22T09:03:31","date_gmt":"2016-01-22T17:03:31","guid":{"rendered":"http:\/\/spijue.wpengine.com\/news\/falling-oil-prices-could-lead-consumers-to-spend-more\/"},"modified":"2016-01-22T09:03:31","modified_gmt":"2016-01-22T17:03:31","slug":"falling-oil-prices-could-lead-consumers-to-spend-more","status":"publish","type":"post","link":"https:\/\/www.juneauempire.com\/news\/falling-oil-prices-could-lead-consumers-to-spend-more\/","title":{"rendered":"Falling oil prices could lead consumers to spend more"},"content":{"rendered":"

WASHINGTON<\/strong> \u2014 Sinking oil prices have cratered the stock market. But a silver lining could appear eventually.<\/p>\n

Cheaper gasoline and heating oil are giving consumers worldwide more money that they can use to step up spending later \u2014 and perhaps energize economies in the United States, Europe and much of Asia.<\/p>\n

The question is, will they \u2014 and when?<\/p>\n

\u201cIt\u2019s definitely a plus for consumers,\u201d Sara Johnson, an economist at forecasting firm IHS Global Insight, said of the deep savings being accumulated from sharply lower energy prices. \u201cWe should see a pickup in spending in the first quarter.\u201d<\/p>\n

The price of oil reached a 12-year low of $28.15 a barrel by the end of trading Wednesday before poking above $29 on Thursday. As recently as June, the price was about $60.<\/p>\n

Retail gasoline prices have sunk to a national average of $1.86 a gallon, the lowest since 2009, according to AAA.<\/p>\n

The timing and size of the economic benefit that many analysts expect to result from cheaper oil and gas isn\u2019t clear. Oil prices began falling in mid-2014 but have so far failed to deliver the kind of boost to U.S. growth that economists had expected. One factor is that widespread layoffs and spending cuts by oil drillers have offset some of the boost from steady consumer spending.<\/p>\n

And many Americans have saved, rather than spent, the money left over after filling up. That has depressed growth because consumer spending drives about 70 percent of the U.S. economy. At some point, though, continued savings from cheaper energy could fuel more robust investment and spending.<\/p>\n

\u201cIt\u2019s a question of, do they spend it now, or do they spend it later?\u201d said Scott Hoyt, senior director of consumer economics at Moody\u2019s Analytics.<\/p>\n

Since the start of the year, global stock prices have plummeted. Many stock investors fear that cheaper oil reflects a worldwide economic slump that has sapped demand, particularly in emerging markets like China and Brazil.<\/p>\n

But most economists say that a huge increase in the supply of oil, rather than a falloff in demand, is the main culprit for tumbling energy prices. That makes it more likely, they say, that developed economies will benefit from energy savings and remain healthy.<\/p>\n

Another factor is the long-term nature of the price decline. Oil and gas prices have fallen for about 18 months. Eventually, Johnson said, the persistence of the price declines will likely assure consumers that cheaper gas is here to stay and encourage more spending.<\/p>\n

Michael Gapen, an economist at Barclay\u2019s, forecasts that consumer spending will grow at a 3 percent annual rate in the first half of this year, lifting growth back to a decent 2 percent to 2.5 percent range. In the final three months of 2015, most analysts think U.S. growth slowed to an annual rate below 1 percent.<\/p>\n

Lower oil prices should also bolster Europe\u2019s fragile recovery, according to economists at Citi. And many Asian countries are also optimistic about the long-term impact<\/p>\n

\u201cThe country has really benefited from the lower oil price,\u201d Prime Minister Nawaz Sharif of Pakistan said at the World Economic Forum in Davos, Switzerland. \u201cPeople have a sort of sigh of relief.\u201d<\/p>\n

\u201cAt the same time, the government also started losing money \u2014 revenue that had come from the import of oil,\u201d he added.<\/p>\n

\u201cThe drop in oil prices is good news for Korean consumers,\u201d said Choi Kyung-Hwan, South Korea\u2019s former deputy prime minister.<\/p>\n

Yet Choi, too, noted, in remarks at Davos, that falling oil prices reflect sluggish growth in emerging markets, which could hurt South Korea\u2019s exports.<\/p>\n

\u201cA fall in oil prices is not just a blessing,\u201d he said.<\/p>\n

The outlook is also complicated in the United States. Energy drilling companies, which scaled back their operations in 2015, will likely have to cut back further this year. Last year, the U.S. mining sector, which includes oil and gas, shed 130,000 jobs even as overall hiring grew at a healthy clip.<\/p>\n

Houston-based Southwestern Energy said Thursday that it would slash 1,100 jobs from a staff of about 2,780. And Regions Bank, based in Birmingham, Alabama, said it would cut 260 jobs in the first three months of this year. The bank recently wrote off a large chunk of its loans to energy companies.<\/p>\n

Last year, those layoffs and sharp reductions in spending by drilling companies partly offset the benefit to consumers of lower prices. And consumers saved more, perhaps reflecting lingering caution in the aftermath of the Great Recession. Americans saved 5.5 percent of their incomes in November, up nearly a full percentage point from a year earlier.<\/p>\n

Overall, consumer spending likely rose just 2.6 percent last year, according to Jesse Edgerton, an economist at JPMorgan. That\u2019s below the 3.6 percent increase he expected. Still, spending might have been ever lower without cheaper gas, he notes.<\/p>\n

For now, there are already some signs of cheaper oil\u2019s benefits.<\/p>\n

Delta Air Lines told investors this week that bookings for this spring are ahead of last year\u2019s pace because cheaper gasoline means consumers have more money.<\/p>\n

And other airlines, including United Continental and Southwest Airlines, have reported big profit increases, thanks to savings from cheaper fuel.<\/p>\n

___<\/p>\n

AP Writers Angela Charlton and Lisa Gibbs contributed from Davos, Switzerland.<\/p>\n","protected":false},"excerpt":{"rendered":"

WASHINGTON \u2014 Sinking oil prices have cratered the stock market. But a silver lining could appear eventually. Cheaper gasoline and heating oil are giving consumers worldwide more money that they can use to step up spending later \u2014 and perhaps energize economies in the United States, Europe and much of Asia. The question is, will […]<\/p>\n","protected":false},"author":107,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_stopmodifiedupdate":false,"_modified_date":"","wds_primary_category":4,"footnotes":""},"categories":[4],"tags":[65],"yst_prominent_words":[],"class_list":["post-7224","post","type-post","status-publish","format-standard","hentry","category-news","tag-nation-world"],"_links":{"self":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/7224","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/users\/107"}],"replies":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/comments?post=7224"}],"version-history":[{"count":0,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/7224\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media?parent=7224"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/categories?post=7224"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/tags?post=7224"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/yst_prominent_words?post=7224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}