-Paul Ashworth, chief United States economist at Capital Economics
As gas prices continue to decline, US consumers find themselves with extra cash in their pockets to spend this year. According to a report from investment banking company Jefferies, lower gas prices could result in an additional $120 billion to $200 billion for US households, translating into $950 per driver. Given consumer spending accounts for around 70% of the US economic activity, the world's number one economy's growth is likely to substantially accelerate this year. Visa's report revealed that half of savings from cheap gas would be put away, while one quarter will be used to pay down debt. Thus, US consumers will be left with around $50 billion to spend on discretionary items such as clothing and food. However, it is estimated that the increased spending will not be fully underway until the second half of 2015. Yet, retailers of all sorts can expect a bump in sales.
America's economy expanded 2.6% in the final three months of the year, much lower than the expected 3.3% growth. Overall for 2014, US gross domestic product rose 2.4%, the highest level in four years, according to the Commerce Department. Economists predict the U.S. economy will grow faster in 2015 on the back of sturdy consumer spending. The US growth this year is expected to be a lot closer to 3%. Meanwhile, the US financial markets were closed on Monday for a public holiday.
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