Good. Since it hurts 7% of the economy and helps about 93% of the economy - good.
Mike...I hear what you are saying. 70% of GDP is consumer-driven and lower gasoline and heating oil prices means more money in peoples' pockets, which is good for the majority of folks out there and yes it might increase disposable income for some and those extra dollars will find their way back into the economy. But it also depends why oil has been declining so precipitously and so fast. If it is purely excess supply (shale revolution in US, resumption in production levels in Iraq, and a few other factors, ...) then it is a great thing because all the major economies in the world (US, Europe, China, and Japan) are net oil importers and this would represent a big stimulus to those economies in the form of lower consumer and producer costs, which can be reinvested in other parts o those economies. But if the fall in price also speaks to a precipitous decline in demand because of stalling economies (which we are experiencing in Europe and Japan and slowing down in China), then global growth slowing will invariably have knock on effects here in the US and might mean slower growth for us down the road. Markets are very worried that this stalling growth is mounting and producing deflationary pressures (which oil price declines is but a factor but think also job cuts, wage declines, etc...) which might throw us back into a global recession shortly. Not good for anyone if that is the case.
That's why Mario Draghi is expected on Jan 22nd to be announcing a major Quantitative Easing program (essentially buying hundreds of billions of Euros in European bonds), driving down rates even further in Europe to incent risk-taking (investments seeking higher returns) and to drive inflationary pressures, which is what prompted the Swiss Central Bank to quit the peg to the Euro today.
Interesting times. It seems like the US economy was starting to reach escape velocity in the last couple of qtrs. but the rapid decline in oil concomitant with stalling European economies and decelerating Chinese economy has put a renewed question mark on global growth and that's what's causing market jitters in the new year.
The rapid drop in oil prices also means localized pain in key markets (Texas, Dakotas, Ohio/Pennsylvania) in the US where shale plays are concentrated, as well as in commodity exporting economies (OPEC countries, Canada, Mexico, Brazil, Russia, and West Africa).
