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Text Box: In the U.S., when people make more money they spend more money. The chart below shows that as workers average hourly earnings goes up so does consumer spending. On average changes in real average hourly earnings lead changes in consumer spending by five months. Current Comment - Real average hourly earnings growth has started to slow down. Consumer spending may be following suit.
Text Box: Obviously, oil prices are very difficult to predict. While oil is sold in a global market, the U.S. is the largest consumer of oil and consumper spending makes up 70% GDP in the U.S. But, the chart below does show that there is some relationship between real consumer spending and oil prices. Current Comment - Real consumer spending may be starting to slow its grwoth. Recently the growth in oil prices has been accelerating. This trend may be short lived if consumer spending continues to slow.
Text Box: As oil prices rise and fall it provides more or less incentive for exploration and the development of new oil fields and more or less production from existing oil fields. These effects that arise from changing oil prices lead to changes in the industrial production for oil and gas machinery. When oil prices are rising, companies spend more money on the equipment needed to get oil out of the ground, which causes the industrial production of that equipment to rise. On average, changes in oil prices lead changes in the industrial production of oil and gas machinery by 11 months. Current Comment - Real oil prices have started growing. The bottoming out of oil prices has caused oil and gas machinery industrial production to accelerate its growth for the first time in almost a year. How long both of these trends last will depend on consumer spending.
Sources
Average Hourly Earnings
Consumer Price Index
Consumer Spending
Oil Prices
Industrial Production
For more information contact Steve Kline, Jr., financial analyst.
513-527-8800
skline2@gardnerweb.com
Links to other Financial Data from Gardner Publications, Inc.
2008 Capital Spending Survey and Forecast Results
Metalworking Business Index
2008 Capital Spending Survey and Forecast Demographic Reports 
Current and past surveys conducted by Gardner Research
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Modern Machine Shop
Production Machining
Moldmaking Technology
Automotive Design & Production