I was struck by this headline in today's New York Times:
High Gas Prices Could Slow Recovery
All this green shoots talk has apparently convinced the New York Times that its a foregone conclusion that the recovery will start in the next few months. Here is how I would have written the headline:
High Gas Prices Could Deepen Recession
My view is that high gas prices won't slow recovery, they will kill the "green shoots" outright before they have a chance to grow. If oil and gas prices continue to grow for the rest of 2009 it will cause consumer spending on all other sectors to continue to fall. I don't see how we can have any meaningful recovery if consumer spending falls.
My personal intuition, which I haven't taken the time to try and support with evidence, is that the recession was triggered by the spike in oil and gas prices last summer. I suspect that rising gas prices were the straw that broke the camel's back for a lot of people who went into default on their mortgages.