By Elliott Wave International
Economists almost universally view lower oil prices as a boon for the U.S. economy.
According to the White House Council of Economic Advisors, the drop in the cost of oil is of "roughly equal magnitude" to the economic sluggishness in China and Europe. But a number of key economic measures suggest that this is not the case. In December, for instance, the U.S. Commerce Department reports that consumer spending fell 0.3%. That's the biggest decline since December 2009, just after the last recession ended.
"Americans are saving the extra cash from cheaper gas or paying debts," explains Reuters. "It doesn't bode well for current consumption."
In January, Real Retail and Food Service Sales fell 0.8%. A breakdown shows the declines ranged well beyond energy expenses, as furniture sales fell 8.7%, clothing was down 9.5% and sporting goods, hobby, book and music sales fell 31.7%. As shown on the chart, the year-over-year change in Real Retail and Food Service Sales has actually been angling lower since February 2011. Note how this measure reversed in much the same manner ahead of the stock price peaks in 2000 and 2007 and the recessions that followed.
The progressively lower highs conform to The Elliott Wave Theorist's February reiteration that the underlying strength of the U.S. economy has actually been weakening since 2000.
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