Report
United States, euro zone: Is a recession possible when oil prices are low?
In the past, o il prices were systematically high in the lead -up to recessions in the United States and the euro zone ( this was the case in 1980, 1990, 2000 and 2008). The rise in oil prices drove up headline inflation and core inflation (via second-round effects), leading to a rise in interest rates and a fall in real income, which weakened activity. But today, given the increase in US oil production, oil prices remain low despite the economic expansion. This is keeping inflation and interest rates low and sustaining real wage growth . Indeed, relative to the past, inflation is around 1.6 and 1.3 percentage points lower in the United States and the euro zone, respectively , thanks to the low level of oil prices. This represents a major contribution to the fact that the economies are still growing today. The role of oil in economic cycles does not receive enough attention.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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