The unexpected slump in the national retail gasoline price, from a peak of $3.80 per gallon in the summer to a near four-year low of $3.00 now, will provide a sizeable boost to fourth-quarter real consumption growth, underlining why we think that fourth-quarter GDP growth could still be as strong as 3.0% annualised. The potential downside risks from lower oil prices are limited. At current prices, the knock-on impact on US oil production should be relatively modest, while there is no reason to believe that falling energy prices could trigger a deflationary spiral in the otherwise strengthening US economy.
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