Tuesday, October 22, 2013

Look for a Hidden Boost in Consumer Spending

The nattering nabobs on Wall Street are worried about the piss-poor jobs number this morning, and I can see that. U.S. employers added fewer than expected workers in September, which was before the budget battle in Washington even happened.  However, this does not derail my bullish thesis.
I'll show you why in one chart ...

This chart shows gas prices over the past two years.  You can see that prices are falling sharply. Prices were an average $3.89 per gallon on October 15, 2012.  They're now at $3.35.

According to an ABC story from earlier this year -- when gas prices were going up -- Merrill Lynch estimates that every penny increase at the pump is equal to $1 billion in lost consumer spending. 

Therefore, falling gasoline prices boost consumer spending by the same amount. And lower gas prices are probably boosting the economy right now.

So, the 54-cent difference in gasoline prices should translate to an extra $54 billion for the economy.

What's more, the EIA says that gasoline prices should continue to decline for the rest of this year and into 2014.

Something to think about when the doom-meisters sound their calls of woe. 

I'll have some picks to ride this trend in the Thursday issue of InvestmentU.com.

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