by Bill McBride on 9/19/2012 08:46:00 PM
Wednesday, September 19, 2012
From Jim Hamilton at Econbrowser: Thresholds in the economic effects of oil prices
As U.S. retail gasoline prices once again near $4.00 a gallon, does this pose a threat to the economy and President Obama's prospects for re-election? My answer is no.See Professor Hamilton's piece for supporting data and graphs.
This is now the fourth time we've been near the $4 threshold. It first happened in June 2008, again in May 2011, and again in April of this year. In fact, on each of those previous 3 occasions the average U.S. retail price of gasoline was higher than it is today.
There is quite a bit of empirical support for the claim that the second or third time oil prices move back near a previous high, the economic disruption is significantly less than the first time; see for example the evidence and literature reviewed in my 2003 Journal of Econometrics paper (ungated version here) and two recent surveys , .
$4/gallon? Been there, done that.
The good news is oil prices have fallen sharply over the last few days, with Brent down to $108.96 per barrel. Brent closed at $117.48 last Friday. The peak for the year was $128.14 back in March, and the closing low was $88.69 in June.
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 373 thousand from 382 thousand.
• At 9:00 AM, the Markit US PMI Manufacturing Index Flash will be released. This is a new release and might provide hints about the ISM PMI for September. The consensus is for a reading of 51.5, down from 51.9 in August.
• At 10:00 AM, the Philly Fed Manufacturing Survey for September will be released. The consensus is for a reading of minus 4.0, up from minus 7.1 last month (below zero indicates contraction).
• Also at 10:00 AM, the Conference Board Leading Indicators for September. The consensus is for no change in this index.
• At 12:00 PM, the Q2 Flow of Funds Accounts from the Federal Reserve will be released.
• Note: On Thursday, the Census Bureau will release the 2011 American Community Survey estimates.
One more question for the September economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).
Posted by Bill McBride on 9/19/2012 08:46:00 PM