by Calculated Risk on 5/22/2009 03:09:00 PM

Last year I wrote a post about how falling oil prices would provide some cushion for the U.S. economy: The Oil Cushion. Here is another update ...

The following graph shows the monthly personal consumption expenditures (PCE) at a seasonally adjusted annual rate (SAAR) for gasoline, oil and other energy goods compared to the U.S. spot price for oil (monthly).

Click on graph for larger image in new window.

Last quarter I noted:

"The good news is at current oil prices (U.S. spot prices averaged about $39 per barrel in February), oil related PCE will be in the $250 billion seasonally adjusted annual rate (SAAR) range in Q1 - well below the $440 billion SAAR of the first 8 months of 2008.

This is a savings of about $16 billion per month compared to the first 8 months of 2008. That savings will definitely provide a cushion for consumers."

As expected, the BEA reported "PCE, Gasoline, fuel oil, and other energy goods" at $265 billion (SAAR) in Q1.

Now, with spot prices pushing $60 per barrel, oil related PCE will probably come in close to $300 billion (SAAR) in Q2.

That is still provides a sizable cushion compared to the first eight months of 2008 (about $11 billion per month), but this is a drag compared to Q1.

Data sources:
PCE from BEA underlying detail tables: Table 2.4.5U. Personal Consumption Expenditures by Type of Product line 117.

Oil prices from EIA U.S. Spot Prices.