Page 7 - Aruba Today
P. 7
U.S. NEWS A7
Friday 22 January 2016
US Financial Front:
Falling oil prices could lead consumers to spend more later
C. S. RUGABER spending drives about 70 and remain healthy. “The country has really have to cut back further
AP Economics Writer percent of the U.S. econo- Another factor is the long- benefited from the lower this year. Last year, the
WASHINGTON (AP) — Sink- my. At some point, though, term nature of the price oil price,” Prime Minister U.S. mining sector, which
ing oil prices have cratered continued savings from decline. Oil and gas prices Nawaz Sharif of Pakistan includes oil and gas, shed
the stock market. But a sil- cheaper energy could fuel have fallen for about 18 said at the World Economic 130,000 jobs even as over-
ver lining could appear more robust investment months. Eventually, John- Forum in Davos, Switzer- all hiring grew at a healthy
eventually. and spending. son said, the persistence land. “People have a sort clip.
Cheaper gasoline and “It’s a question of, do they of the price declines will of sigh of relief.” Houston-based Southwest-
heating oil are giving con- spend it now, or do they likely assure consumers “At the same time, the gov- ern Energy said Thursday
sumers worldwide more spend it later?” said Scott that cheaper gas is here to ernment also started losing that it would slash 1,100 jobs
money that they can use from a staff of about 2,780.
to step up spending later Cornelio Bonilla pumps gas at Best Food Mart gas station in Gainesville Ga. Sinking oil prices have And Regions Bank, based
— and perhaps energize cratered the stock market, but a silver lining may soon appear. Cheaper gasoline and heating oil in Birmingham, Alabama,
economies in the United will give consumers worldwide more money to spend, or save and spend later, and possibly boost said it would cut 260 jobs
States, Europe and much economic growth in the U.S., Europe and much of Asia. in the first three months of
of Asia. this year. The bank recently
The question is, will they — (AP Photo/Kevin Liles) wrote off a large chunk of
and when? its loans to energy compa-
“It’s definitely a plus for Hoyt, senior director of stay and encourage more money — revenue that nies.
consumers,” Sara Johnson, consumer economics at spending. had come from the import Last year, those layoffs and
an economist at forecast- Moody’s Analytics. Michael Gapen, an econo- of oil,” he added. sharp reductions in spend-
ing firm IHS Global Insight, Since the start of the year, mist at Barclay’s, forecasts “The drop in oil prices is ing by drilling companies
said of the deep savings global stock prices have that consumer spending will good news for Korean con- partly offset the benefit to
being accumulated from plummeted. Many stock grow at a 3 percent annual sumers,” said Choi Kyung- consumers of lower pric-
sharply lower energy pric- investors fear that cheap- rate in the first half of this Hwan, South Korea’s for- es. And consumers saved
es. “We should see a pick- er oil reflects a worldwide year, lifting growth back to mer deputy prime minister. more, perhaps reflecting
up in spending in the first economic slump that has a decent 2 percent to 2.5 Yet Choi, too, noted, in re- lingering caution in the af-
quarter.” sapped demand, particu- percent range. In the final marks at Davos, that fall- termath of the Great Re-
The price of oil reached a larly in emerging markets three months of 2015, most ing oil prices reflect slug- cession. Americans saved
12-year low of $28.15 a bar- like China and Brazil. analysts think U.S. growth gish growth in emerging 5.5 percent of their incomes
rel by the end of trading But most economists say slowed to an annual rate markets, which could hurt in November, up nearly a
Wednesday before poking that a huge increase in the below 1 percent. South Korea’s exports. full percentage point from
above $29 on Thursday. As supply of oil, rather than Lower oil prices should “A fall in oil prices is not just a year earlier.
recently as June, the price a falloff in demand, is the also bolster Europe’s frag- a blessing,” he said. Overall, consumer spend-
was about $60. main culprit for tumbling ile recovery, according The outlook is also compli- ing likely rose just 2.6 per-
Retail gasoline prices have energy prices. That makes to economists at Citi. And cated in the United States. cent last year, according to
sunk to a national average it more likely, they say, that many Asian countries are Energy drilling companies, Jesse Edgerton, an econo-
of $1.86 a gallon, the low- developed economies will also optimistic about the which scaled back their mist at JPMorgan. That’s
est since 2009, according benefit from energy savings long-term impact operations in 2015, will likely below the 3.6 percent in-
to AAA. crease he expected. Still,
The timing and size of the spending might have been
economic benefit that ever lower without cheap-
many analysts expect to er gas, he notes.
result from cheaper oil and For now, there are already
gas isn’t clear. Oil prices some signs of cheaper oil’s
began falling in mid-2014 benefits.
but have so far failed to Delta Air Lines told inves-
deliver the kind of boost to tors this week that bookings
U.S. growth that economists for this spring are ahead of
had expected. One factor last year’s pace because
is that widespread layoffs cheaper gasoline means
and spending cuts by oil consumers have more
drillers have offset some of money.
the boost from steady con- And other airlines, includ-
sumer spending. ing United Continental and
And many Americans have Southwest Airlines, have
saved, rather than spent, reported big profit increas-
the money left over after fill- es, thanks to savings from
ing up. That has depressed cheaper fuel.q
growth because consumer
