Issue link: http://palletcentral.uberflip.com/i/685770
18 PalletCentral • May-June 2016 palletcentral.com he collapse in oil prices has received a lot of attention in the financial press over the last two years. One driver for the fall in oil prices (and other major commodity prices) has been slower growth in the developing world, particularly China. Another key driver was the growth in global oil production. Initially the focus was on the benefits of falling gasoline prices, particularly for the American consumer and certain industrial segments (airlines for instance). Gasoline prices are currently near $2 per gallon vs. $4 per gallon two years ago. There is no question that the drop has helped the consumer, but it has not helped boost the overall growth of the U.S. economy as had been hoped. As will be discussed below, it is because the second order effects were not fully understood and were much larger than many analysts expected—including yours truly. U.S. Economic Growth Stable, but Slow First, let's recap the overall economic situation. Economic growth (as reported in Gross Domestic Product—GDP) remains stuck near 2% on a year-over-year basis. The biggest component of the economy, the consumer, continues to grow nicely—near 3%. Falling oil prices have given the consumers more disposable income and increased their willingness to buy new vehicles. Truck and auto sales remain near 17 million units, which is near 2005 peak levels. Employment growth continues to be strong as well. Employment growth in 2015 averaged near 244,000 per month and continued to grow at a 200,000 per month clip in the first three months of 2016. With wages finally starting to grow a bit faster and unemployment near 5%, consumer confidence is high. Consumer spending should Why Didn't Falling Oil Prices Boost Economic Growth ECONOMY By Lynn Michaelis T