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How Falling Gas Prices May Stave Off Recession

By
Mortgage and Lending with Guaranteed Rate (NMLS ID #2611) NMLS ID #107432

After peaking in July 2008, gas prices fell by 20 percent over the next three monthsGiven the stock market's recent performance, it's not surprising that gasoline's falling prices are garnering very little attention. That doesn't make it any less relevant, however.

Since peaking in July, gas prices are off by 20 percent.

Falling gas prices are an important positive for the U.S. economy because less money spent at the pump means that more money is saved per household for everyday items including food and other staples.

In addition, consumer spending makes up two-thirds of the economy. 

Therefore, falling gas prices may lessen the impact of a forecasted recession.  Because Americans are notoriously poor savers, the extra cash-on-hand is likely to get spent which will, in turn, push the economy forward through the upcoming holiday shopping season.

So, just as inflation can bad for mortgage rates, so can recession.  And while recession won't always cause mortgage rates to rise, right now, it's one of the factors driving rates higher.  Falling gas prices may help keep that scenario at bay.

Comments (2)

Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

Scott: I'm glad you pointed this out. With Americans feeling so strapped, it's nice when inflation moderates.

Oct 11, 2008 03:21 AM
Richard Weeks
Dallas, TX
REALTOR®, Broker

We are having a bit of a price war in the Dallas/Fort Worth area, with some places selling for about $1.89

Oct 11, 2008 07:47 AM