Limited hit from energy price rise on US consumption so far
Limited hit from energy price rise on US consumption so far
Friday 13 October 2023
Cross Asset
Limited hit from energy price rise on US consumption so far
October 2023 | The significance of energy trends for the US economy has declined over the last three decades; the consumption of energy for each real dollar of gross domestic product has fallen by 3% every year and this will likely continue with the energy transition. While the importance of energy has gradually declined, the issue has returned to the fore following a series of energy shocks that have boosted price volatility. Oil prices pass through to the economy via various channels, including inflation, consumption, corporate margins and investment, productivity, the balance of payment and global savings (through petrodollars), and in the long run may accentuate social stress.
01 | The impact of energy on the US economy has declined over the last three decades, but a series of shocks since the pandemic and a +30% price surge since July has brought the topic back to light.
02 | Higher oil prices – which are up about 30% over the last two months – could add a significant hurdle to the disinflation process and keep policy rates higher for longer.
03 | The ECB increased its key rates by 25bp in its last meeting, but at the same time it delivered a dovish message, suggesting that the terminal rate has probably been reached.
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