The positive effect will work its way through the economy via two channels: first, it will give consumers more disposable income, which they can spend on goods and services; second, it will reduce input costs and encourage production in sectors other than oil, especially energy-intensive sectors. The United States, as a net importer, will benefit from the drop in oil prices.
Our October forecasts were for U.S. growth to average around 3 per cent over the next couple of years, and the positive oil shock adds an upside risk to our projection. Other economies that are large net importers of oil, such as China, Japan and Europe, will also get a boost to their economic growth.