Joe Smuck Is Spending The Money Saved From Lower Energy Prices

Looking back, the Federal Reserve believed the decline in oil prices was good for the economy - and would provide a stimulus as consumers could spend the money saved on lower oil prices on other items.

A quick look shows the rate of consumption growth has declined from its peak in January 2015. Lower oil prices did not seem to lift consumption.

What I found interesting is that consumers are currently spending more on energy related items than they did before the recent decline in energy prices.

Increased consumer spending since the beginning of 2015 came from durable goods - and to a large extent from the auto sector. The consumer seems have invested the fuel savings on gas guzzling beasts. [graphic below from University of Michigan]

And consumers started driving more. The graph below is population adjusted miles driven.

The market expectations for weekly initial unemployment claims (from Bloomberg) were 261,000 to 280,000 (consensus 265,000), and the Department of Labor reported 247,000 new claims. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 265,000 (reported last week as 265,000) to 260,500. The rolling averages generally have been equal to or under 300,000 since August 2014.

Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line), 2015 (violet line)

Bankruptcies this Week: Goodrich Petroleum, SunEdison (fka MEMC Electronic Materials), Sao Paulo, Brazil-based Lupatech (f/k/a Valmicro Industria e Comercio de Valvulas - Chapter 15)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.