Brent Oil is dancing around our long-term tail-risk line of $108.36/barrel today. It broke out above it earlier in the session.
Our global macro model says $108.36 (or higher) is key. That is where we choke global consumption demand. Since U.S. consumption growth effectively doubled in the last six months to 2.4% vs. 1-1.2% prior, that’s a headwind, on the margin.
An expedited back-up in oil costs and the follow-on impact to fuel prices will be a headwind to other discretionary consumption growth. Gas prices aren’t yet a headwind (they are still lower on both a YoY and QoQ basis) but any existent tailwind is diminishing.
A large and sustained back-up in energy costs (at the same time as the furloughing of federal workers), while not a direct drag to disposable income growth, does serve as an incremental drag to consumption.
Bottom line: Rising Oil Prices is not a dynamic supportive of continued #GrowthAccelerating.
