There is less evidence that cheaper oil has given a major boost to the global economy, indeed estimates of global growth for 2015 have been revised down.
It was always likely that the impact of lower energy costs on real incomes and household spending would be felt with a lag, particularly if households and firms took time to adjust their expectations to the new reality of cheaper energy: in short, the “losers” from the fall in the price of oil have taken a hit before the beneficiaries have seen the gain. Granted, some of the fall reflects lower expected demand, however some reflects higher expected supply, for example from Iran, following a rapprochement with the West.
Our base case still assumes that cheap energy is a reflationary impulse for net oil importing economies: high energy prices were part of a cocktail of influences squeezing households in the early part of this decade, and this has now reversed. There has been a significant improvement in the terms of trade for commodity consumers versus producers. Assuming the marginal propensity to consume of the latter is greater than the former, there should be an eventual boost to global growth.
