So Where'sThe Economic Surge Caused By The Extra Pocket Money?

 | Feb 22, 2015 05:09AM ET

As many will remember, many pundits (aka economists) predicted an upsurge in consumer spending resulting from lower fuel prices. Here is a quote from Federal Reserve Chair Yellen in her 17 December 2014 press conference :

I think the judgment of the Committee is that, from the standpoint of the United States and the U.S. outlook, that the decline we have seen in oil prices is likely to be, on net, a positive. It’s something that’s certainly good for families, for households. It’s putting more money in their pockets. Having to spend less on gas and energy, and so, in that sense, it’s like a tax cut that boosts their spending power. The United States remains—although our production of oil has increased dramatically, we still remain a net importer of oil. Of course there may be some offset in the form of reduced drilling activity, and possibly some change, some reduction in cap-ex plans in the drilling area. But, on balance, I would see these developments as a positive for the standpoint of the U.S. economy.

Follow up:

And in the 28 January 2015 FOMC meeting minutes:

Participants generally regarded the net effect of the recent decline in energy prices as likely to be positive for economic activity and employment..... Recent declines in oil prices, which had boosted household purchasing power, were among the factors likely to underpin consumer spending in coming months; ...

Oh really? The preliminary hard data is not confirming the gut feeling of economists in general, and the Federal Reserve specifically, concerning the effect of the oil price decline.

Seasonally adjusted retail sales have now been declining for two months. The three month rolling averages of the unadjusted data are also declining. Of course such a short duration movement proves little - but the direction is down, not up, and not even unchanged.