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Dec 17, 201403:51 PMOpen Mic

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Market and economic report: Falling oil prices capture markets’ attention

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The decline in oil prices has captured the markets’ attention, leaving key economic data in the background. The 40% decline in oil prices will typically lift U.S. economic activity by about 1% over the next couple of years. The benefits will take some time to be reflected in the economic data, likely later in 2015.

In the meantime, recent economic releases are consistent with solid U.S. economic activity. The steady improvement in the jobs market seems to be continuing. Job openings remain near the highest levels post-recession, and weekly initial unemployment claims remain below 300,000. Confidence is also improving. The preliminary December University of Michigan Consumer Sentiment Index rebounded to the highest level since 2007, and the National Federation of Independent Business Optimism Index also reached new post-recession highs.

Consumer health appears solid, and the benefits of stronger confidence can be observed in the growth in retail sales in November, rising 0.7% overall for the month and more than 5% over the past year.

Outside the United States, attention remains focused on policy decisions. The weekend elections in Japan resulted in a landslide victory for Shinzo Abe’s party, solidifying the reformers’ power. Further policy reforms are likely to be undertaken, but it will take some time for the economy to recover from the recent recession caused by the increase in the consumption tax.

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