Falling energy prices help explain this year’s unexpectedly strong economic performance in the US and Europe.
Falling oil and natural gas prices are dampening household spending, boosting confidence, easing pressure on government budgets and could boost eurozone output by about 1.5%, according to The Wall Street Journal .
Falling energy prices help explain this year’s unexpectedly strong economic performance in the US and Europe. Supply chain managers on both sides of the Atlantic are now more optimistic than in recent months, according to business surveys by S&P Global, seen as a reliable indicator of future growth.
The gains for households, businesses and governments will also offset rising borrowing costs as central banks raise interest rates to cool historically high inflation.
The price of a barrel of oil has fallen by more than a third since the middle of last year, to around $77 from $121, below pre-war levels, as markets adjusted to a Western embargo on Russian supplies and oil was released from emergency reserves.
In Europe, underlying wholesale natural gas prices have fallen nearly 90% since last summer, hitting their lowest level since 2021 thanks to warm weather, austerity and rising imports.
Lower natural gas prices mean significant cost savings for Europe, equivalent to around 3.5% of this year’s gross domestic product for Italy and around 2% of GDP for Germany, Portugal and Spain , according to Capital Economics.
Overall, Capital Economics and Berenberg Bank estimate that the energy stimulus could boost eurozone output by about 1.5%, roughly equivalent to an annual increase.
Consumer confidence has risen significantly on both sides of the Atlantic in recent months, reversing last year’s decline. This could mean that households spend more of the money they saved during the pandemic, which would fuel further growth, economists said.
Recall that the price of natural gas in Europe in exchange trading fell below $450 per 1,000 cubic meters. m for the first time since July 2021. Gas is becoming cheaper despite the cold snap in early spring. As a result, withdrawals from European UGS facilities are at historic highs.
Source: korrespondent
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