US consumers are more than just Sunday drivers. Recent lacklustre employment and gross domestic product (GDP) estimates hint at a possible bump in the recovery. Contrary to earlier suspicions, however, Americans are spending most of their windfall from lower gas prices, the JP Morgan Chase Institute reckons. It means the oil price may be an even bigger economic factor than expected.
A splattering of recent data has already called into question the strength of the US recovery. Just 142,000 jobs were added in September, far fewer than analysts had expected, and well below the 200,000 six-month average. Early surveys indicate that GDP for the third quarter may only have grown by about half of the 3.9 per cent annualised clip in the three months to June. That's not even taking into account the troubles that have whacked markets over the past few months as overseas turmoil mounts - be that looming recessions in parts of Latin American or China's slowdown.
Lower gasoline prices are usually a cause for American consumers to cheer - and they were certainly more confident about their prospects in August and September, according to the Conference Board. But Gallup polling in June indicated just 24 per cent of Americans were spending the extra money saved on the falling cost of fuel to run their vehicles. The rest were saving it or paying down debt.
That implies that Americans feel confident enough to splash out a bit. But it also implies that if the savings go away due to higher oil prices, so will some associated economic expansion. Last quarter, consumers accounted for more than half of the nation's output growth. If gas prices spike any time soon, this blessing could quickly become a curse.
A splattering of recent data has already called into question the strength of the US recovery. Just 142,000 jobs were added in September, far fewer than analysts had expected, and well below the 200,000 six-month average. Early surveys indicate that GDP for the third quarter may only have grown by about half of the 3.9 per cent annualised clip in the three months to June. That's not even taking into account the troubles that have whacked markets over the past few months as overseas turmoil mounts - be that looming recessions in parts of Latin American or China's slowdown.
Lower gasoline prices are usually a cause for American consumers to cheer - and they were certainly more confident about their prospects in August and September, according to the Conference Board. But Gallup polling in June indicated just 24 per cent of Americans were spending the extra money saved on the falling cost of fuel to run their vehicles. The rest were saving it or paying down debt.
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Luckily, JP Morgan's recently formed think tank used its access to the bank's credit and debit card data to paint a clearer picture. Its report, published on Thursday, analysed how customers tweaked spending in response to gas prices falling more than $1 per gallon, or about one-third, from late 2013 to late 2014. It revealed that people have been spending 80 per cent of the benefit. For lower-income Americans that provided more than a one per cent boost to monthly earnings. It also details what people are using it for: restaurants account for almost a fifth; some 10 per cent went on groceries; while entertainment and retail each garnered seven per cent.
That implies that Americans feel confident enough to splash out a bit. But it also implies that if the savings go away due to higher oil prices, so will some associated economic expansion. Last quarter, consumers accounted for more than half of the nation's output growth. If gas prices spike any time soon, this blessing could quickly become a curse.