Obama’s chief economist says oil price drop offsets slowdown overseas
Falling oil prices will boost U.S. growth enough this year to offset the drag from the slowing economies of China and European nations, President Barack Obama’s top economist forecasts.
Jason Furman, chairman of the White House Council of Economic Advisers, told reporters the gain to the U.S. from the dropping cost of oil is of “roughly equal magnitude” to the drag from slowing growth in China and sluggishness in the euro zone.
Furman briefed reporters on a White House economic report that projects accelerating U.S. growth this year even as a stronger dollar and a slowing global economy crimp exports.
“We have a lot of domestic momentum,” Furman said, citing strengthening consumer spending and business investment.
The annual Economic Report of the President, to be released Thursday, projected 3 percent annual growth this year in an estimate that was completed Nov. 20. Furman said that since then, oil prices have continued to drop and U.S. growth in the final quarter of last year was stronger than the administration anticipated.
If oil prices continue at current levels through the year, the price drop will provide a boost worth approximately $70 billion to the U.S. economy, Furman said.
West Texas Intermediate crude oil on Wednesday closed at $52.14 a barrel, down from $92.30 a year earlier.
Obama said in a letter accompanying the report that the U.S. is “poised for another good year.”
Still, the accompanying report cited headwinds including “sagging” economies in the 18-nation euro zone and Japan and “concerns about a slowdown in China.”
“Both the recent strength of the dollar and slowing demand in much of the world outside the United States will work to weaken U.S. export growth in the near term,” the report added.
The Bloomberg Dollar Spot Index, which tracks the dollar’s performance against a basket of 10 leading global currencies, closed yesterday up 14.2 percent from the same day a year earlier.
Much of the 419-page document was devoted to a detailed economic case for Obama’s policy agenda, including tax credits for child care and education, paid family and sick leave, a higher minimum wage, infrastructure spending, a corporate tax overhaul and new trade agreements for the Pacific and Atlantic regions.
Arguing for Obama’s trade agenda, the report cited “benefits to the middle class of enhanced U.S. trade,” including the growth in services exported to other countries.