ML-Implode News - This time, cheaper oil does little for the U.S. economy

"We got this wrong," John C. Williams, president of the Federal Reserve Bank of San Francisco, told an audience in Santa Barbara, California, this month.
Economists at JPMorgan Chase, who predicted last January that lower oil prices would add about 0.7 of a percentage point to the economic growth rate in 2015, now estimate that lower prices might have shaved 0.3 of a percentage point off the growth rate.
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Lower oil prices historically were a cause for celebration in the developed world... but this time is different. The losses from lower prices are larger and quicker than expected as energy companies cut back on investment and lay off workers, while the gains are smaller and slower to materialize, as consumers save some of their windfalls.

We'd also like to point out that some of this "surprise" is the result of statistics-blindness; confused by the statistics showing a "higher savings rate" after the credit crisis amidst the "Great Recession", economists and market-boosters of stripes interpreted that as a sign of economic strength. But paying down one's debt because of financial distress (including stubbornly high interest rates for consumers who don't get the benefits of being Fed Primary Dealers or leveraged-loan market operators) is not a sign of fundamental strength. No doubt consumers would like to spend more, but in all practicality, the marginal freed-up cash flow due to low fuel prices merely allows them to perform the same debt paydowns a bit quicker. In other words, once the financial and base economic situation (and consumer psychology) has changed to one of a defensive posture, a little bit of extra cash is not going to cause a stampede to the malls to buy baubles.

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This time, cheaper oil does little for the U.S. economy