Goldman Sachs 4 reasons higher oil prices merely a "manageable headwind" for US economy

<p>Goldman Sachs says that while a sustained climb in oil prices could slow consumption and economic growth it will be a "manageable headwind" for the U.S. economy.</p><ul><li>"While we forecast consumption growth to slow during the fall and winter, we think higher oil prices are unlikely to cause consumer spending and GDP to decline" </li></ul><p>The note from GS economists goes on to discuss four key reasons why the Goldman team isn't too concerned about the surge in oil prices. In summary:</p><ol><li>the magnitude of the oil-price increase is relatively small

"Oil prices have risen by $20 per barrel — compared to +$40 in the first half of 2008 and +$45 in the first half of 2022 — and our forecast of retail gasoline prices using futures and wholesale markets indicates that most of the rebound has already occurred," </li><li> "offsetting positive effect" of higher energy-sector capital expenditure (CapEx), will give a GDP growth boost from the CapEx change.</li><li>the year-to-date pullback in coal and natural-gas prices, as well as the end of the summer heat waves will bring electricity prices lower during the fall … would also boost consumer incomes and likely consumption … offsetting roughly one-quarter of the gasoline headwind</li><li>
Goldman does not expect the Fed to tighten monetary policy in response to oil prices as long as the price moves tend to be short-lived.

"The Fed should worry about the implications for price stability only if higher oil prices contribute to a de-anchoring of inflation expectations … We are relatively unconcerned about this risk and we do not expect the recent oil move to meaningfully boost consumer inflation expectations."</li></ol>

This article was written by Eamonn Sheridan at www.forexlive.com.