Tuesday, November 21, 2017
Business

Will higher gas prices derail the economic recovery?

RECOMMENDED READING


NEW YORK — The price of gas in the United States has jumped 45 cents since Jan. 1 and is the highest on record for this time of year, an average of $3.73 a gallon. On Wall Street, talk has turned from the European debt crisis to another worry: Will higher gas prices derail the economic recovery?

Not yet, economists say. They argue that the United States is in much better shape than early last year, when a similar surge in fuel prices weighed on economic growth by squeezing household budgets. Americans spent less on clothes, food and everything else.

Rising gas prices hurt less when an economy is improving than when it's slowing down. So economists expect other spending won't be badly hurt, at least for now. If gas breaks its record of $4.11 a gallon, however, all bets are off.

"Can the economy withstand the increase we've seen so far? The answer is yes," says David Kelly, chief market strategist at J.P. Morgan Funds.

The reasons:

Jobs: The country has added 2 million over the past year. Those 2 million people with paychecks will spend them, which helps the economy.

Job security: Unemployment claims, the best measure of layoffs, are at a four-year low. Fewer Americans are worrying about losing their job, so they can take the punch of higher gas prices and move on.

General improvements: A steadier housing market, the Dow Jones Industrial Average's ascent to 13,000 and other signs of an improving economy also help. Add them together and consumer confidence is the highest in a year. More confidence makes people more likely to keep spending on other things even if gas goes up.

"The public will howl as we approach $4 gas, but they will probably continue to increase spending," says Carl Riccadonna, a senior economist at Deutsche Bank.

The key is what impact gas prices have on other spending. All consumer spending isn't equal. A dollar spent on gas has less of an impact on the U.S. economy than a dollar spent in a restaurant or at a baseball game. The U.S. is an oil-importing country, so many of the dollars spent on gas ultimately leave the country.

The rule of thumb among economists is that a 25-cent increase in gas knocks $25 billion to $30 billion off consumer spending in a year and lowers economic growth by 0.2 percentage points, says Carl Riccadonna, senior economist at Deutsche Bank.

"It's really a two-horse race," Riccadonna says. "There's rising energy costs, and then there is households' ability to handle those rising costs."

So far, households appear to be keeping up. Economists think the economy will grow at a 2.2 percent annual rate in the first half of this year, compared with 0.9 percent in the first half of last year.

Some economists believe oil and gas prices are already nearing a danger zone. "We're getting close to a point where we should start worrying," says Thomas Simons, a market economist at Jefferies & Co. "People hate paying for gas. You get no pleasure out of it, unlike food or clothes."

If gas goes to $4.50 a gallon and stays there, it would cost each household about $1,000 more this year than last to buy the same amount of gas.

Comments
Barricades reinforce security for holiday events on St. Petersburg’s downtown waterfront

Barricades reinforce security for holiday events on St. Petersburg’s downtown waterfront

Times Staff Writer ST. PETERSBURG — World and national tragedies are changing the city’s approach to security for special events at North Straub Park.With the approach of the holidays, concrete barricades have been erected at a section of the park’s ...
Updated: 2 hours ago
Eight women say Charlie Rose sexually harassed them - with nudity, groping and lewd calls

Eight women say Charlie Rose sexually harassed them - with nudity, groping and lewd calls

Eight women have told the Washington Post that longtime television host Charlie Rose made unwanted sexual advances toward them, including lewd phone calls, walking around naked in their presence, or groping their breasts, buttocks or genital areas.Th...
Published: 11/20/17
St. Petersburg council okays restaurant deal for Manhattan Casino

St. Petersburg council okays restaurant deal for Manhattan Casino

ST. PETERSBURG — The City Council on Monday approved a lease for the Manhattan Casino, a landmark building in the city’s historic African-American business and entertainment community.It was a controversial decision for some of the city’s black resid...
Published: 11/20/17
Tampa Electric, contractor fined $43,000 in gas leak

Tampa Electric, contractor fined $43,000 in gas leak

APOLLO BEACH — The federal Occupational Safety and Health Administration fined Tampa Electric $18,108 and gave the company two "serious" citations for its response to a gas leak at the Big Bend Power Station in May, the agency announced late Friday.T...
Published: 11/20/17
Forecast: Florida retailers expect strong holiday shopping sales

Forecast: Florida retailers expect strong holiday shopping sales

‘Tis the season for holiday shopping, and this year is expected to be particularly kind to retailers.The Florida Retail Federation’s holiday shopping forecast predicts that a combination of high consumer confidence, strong tourism numbers and a littl...
Published: 11/20/17
Up for sale? Activist investor grabs stake in Tampa’s Bloomin’ Brands

Up for sale? Activist investor grabs stake in Tampa’s Bloomin’ Brands

TAMPA — If you tread water too long in the same spot, someone might start asking why you’re not trying to swim somewhere.Tampa’s Bloomin’ Brands — parent company of such prominent restaurant chains as Outback Steakhouse, Carrabba’s Italian Grill and ...
Published: 11/20/17
Glenn Thrush, New York Times reporter, accused of sexual misbehavior

Glenn Thrush, New York Times reporter, accused of sexual misbehavior

The New York Times said Monday that it was suspending Glenn Thrush, one of its most prominent reporters, after he was accused of sexually inappropriate behavior.The move came after the website Vox published a report containing allegations that Thrus...
Published: 11/20/17
Most air travelers say taking off your shoes is okay. An etiquette expert disagrees

Most air travelers say taking off your shoes is okay. An etiquette expert disagrees

Unless you are ensconced in first class, sleeping on a plane is as intimate as dozing off in a waiting room on jury duty — everyone on the aircraft knows the decibel level of your snoring and the sad state of your socks.To gauge how passengers percei...
Published: 11/20/17

Stolen car crashes in St. Pete, leaving passenger, 15, with life threatening injuries

Two boys in a stolen car struck a dip in the roadway and crashed into a tree, leaving the 15-year-old passenger with life-threatening injuries, St. Petersburg police said.The crash occurred about 11:25 a.m. Sunday as the car sped west on 11th Avenue ...
Updated: 1 hour ago
Senator Nelson on tax reform bill: Small business will ‘get it in the neck.’

Senator Nelson on tax reform bill: Small business will ‘get it in the neck.’

TAMPA — A week ahead of the expected vote on a controversial tax reform bill, U.S. Sens. Bill Nelson and Ron Wyden, D-Ore., visited Tampa to deliver a message to small businesses: This bill will hurt you."Small businesses are the economic engine of F...
Updated: 10 hours ago