Publications: Notes at the Margin

Gasoline, Auto Sales, and Recession (July 5, 2022)


Economists keep lowering their economic growth projections. Many now see a modest recession in 2022. The Western Europe situation could be much worse if Russia continues to limit natural gas sales to Germany and other countries, especially following the shutdown of the Freeport LNG export terminal in Texas. Europe’s problems could become graver if safety concerns prompt regulators to keep the plant closed past the end of the year.[1]


The economic situation in the United States, though, is our primary concern. Most economists seriously underestimate the magnitude of the coming recession. Our worry stems from the rapid increase in gasoline prices and the likely economic consequences. As we explain below, the historical economic data suggest the downturn could be much more severe than most expect. Research by economist James Hamilton of the University of California, San Diego, points to a possible rapid drop in consumer spending, especially on durable goods like autos. The Federal Reserve’s recent actions could worsen the decrease.

[1] Ari Natter, “Shuttered Texas LNG Plant Delays Restart After Federal Order,” Bloomberg, June 30, 2022 [].



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