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.
And the personal savings rate, peaked at the end of 2012, has been in a very tight range since January 2013. Any savings from lower fuel costs did not migrate into savings (money banked or debt reduced).
Energy prices at times positively correlate to expenditures, at times negatively correlate - but most of the time they do their own thing.
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 to 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.
Still over time, the real correlation for expenditures is to income. People eventually spend all they make. If you measure an economy by how much it spends (GDP), why would anyone believe lower prices for anything could provide an economic boost. Said Yellen at a press conference on 17 December 2015:
From the standpoint of the U.S. and U.S. outlook, the decline we've seen in oil prices is likely to be, on net, a positive ... It's good for families, for households. It's putting more money in their pockets.
GDP is far from a perfect tool to measure the economy, and does not attempt to measure the economic health of its median citizen.
Consider during the periods of lower gasoline prices, consumers began to spend more than they made. Did lower fuel prices make families feel richer? Is this a coincidence or just another economic law not understood?
My usual weekly wrap is in my instablog.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.