Today’s release of personal income and expenditure data was about as expected and the January-February data suggest that first quarter real personal expenditures component of the real GDP account will show about 2% real growth.
But the energy expenditures within the data has been little noticed. Normally rising energy prices dampen the economy. But this time around the warm winter, falling natural gas prices and conservation appear to be offsetting the negative impact of higher oil prices. Nominal expenditures on energy peaked at $676.8 billion in September, 2011 and fell to $610.5 billion in January,2012 before rebounding to some $636.4 billion in February, 2012. The drop from September to January was about 10% and even after the February rebound nominal consumer spending on energy was still some 6% below it’s September peak. So, contrary to the standard assumption it does not appear that rising oil prices is doing that much damage to economic growth.
As the chart shows, energy as a share of consumer spending was 5.78% in February as compared to the recent September peak of 6.24% and 7% at the July, 2008 peak.