Economy: The Upside to the Downturn

VIDEO: Drop in oil prices means good news for U.S. consumers.
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Amid widespread gloom about the dismal economy, the proverbial silver lining still remains. Oil prices have declined nearly 15 percent since July, and experts expect to see savings of up to 50 cents a gallon at the gas pump in the coming weeks.

"The minute that prices at the pump go down, you start saving, you start spending, having more in your pocket to spend elsewhere in the economy," said Diane Swonk, chief economist at Mesirow Financial. "You don't have to pass any legislation, and it comes right away."

Speaking of spending, new data released today illustrates America's resilience. Despite Washington's debt battle, consumers kept shopping in July. Spending increased to more than $390 billion, up half a percent in just one month.

"The bump in retail sales in July was a welcome relief, especially after the avalanche of bad news," said Swonk. "The consumer in the face of many headwinds was still at least keeping its head above water."

So, what are we buying?

The answer: More electronics, appliances and furniture, as well as stocking up on such basics as groceries and clothing. And it's not just retail and gas looking better -- mortgage rates are dipping to historic lows.

"By refinancing now, taking advantage of lower rates, households can reduce their monthly payments, create a little bit of breathing room, and that's money that can be pumped back into the economy by spending elsewhere," said Greg McBride, senior analyst for Bankrate.com.

Fifteen-year fixed-rate mortgages are at a record low, averaging 3.5 percent this week. While 30-year fixed-rate mortgages were the lowest in nine months, averaging 4.32 percent.

As a result, refinance applications rose to their highest level of the year, up 30 percent last week. Refinancing gives some homeowners a chance to free up more cash and the low rates are also likely to spur home sales.

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