Showing posts with label Domestic Investment. Show all posts
Showing posts with label Domestic Investment. Show all posts

Tuesday, October 20, 2015

What really happened to the economy when oil prices crashed?

Is it true that the oil price crash did not translate into higher consumption?

This graph below tells the story. Starting from Q2 2014 when the price of WTI crude was $105 (green line). You can see that Personal Consumption Expenditures (blue line) rose by an additional $353 billion, cumulative, over the ensuing four quarters.
.
The reddish brown line is Non-Residential Private Domestic Investment. Even that rose, though not by much. (Oil effect.)

The economy grew more slowly because imports increased so yes, there was leakage. However, demand was strong.

Personal Consumption/WTI/Mike Norman Economics