Paying for gas image via shutterstock. Reproduced at Resilience.org with permission.
Among the disappointments in the 2015:Q1 GDP figures was weak consumption growth, which was a little surprising given the extra cash most consumers have on hand as a result of lower energy prices. I wanted to take a look at how the recent consumer behavior compares with what we’ve seen historically.
The graph below plots the price of energy goods and services relative to the overall price consumers pay for other purchases. Real energy prices have fallen about 20% from where they had been last summer.
The blue line shows the predicted path for consumption based only on consumption and energy data available in September of 2007, while the green line shows the path predicted given the big increase in energy prices between September 2007 and July of 2008. The graph indicates that about half of the slowdown in consumption growth during the first three quarters of the Great Recession could be attributed to energy prices.