January 20, 2015 12:45 am
"The fall in energy prices could hardly have come at a better time, said TD Chief Economist Craig Alexander. Just as the job market is hitting its stride and wages are moving up, energy prices are falling, reducing inflation and leaving more money in consumers' pockets."
Since September, oil and gasoline prices have fallen more than 40 percent, and American consumers are the clear beneficiaries. "While falling prices will slow growth in oil-producing regions of the country, the average American household will save over $500 on gasoline over the next year," said Alexander. "Money that is not funneled into gas tanks will be used on other goods and services, providing an important lift to consumer spending."
The improvement on the job front should mean higher interest rates. However, this is balance against an inflation outlook that has becoming increasingly benign over the next year. Rising job openings, falling unemployment, and rising wages are all signs that, as the temporary impact of decreasing energy prices falls out, inflation will move toward the Fed's target.
Source: TD Economics
Published with permission from RISMedia.