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Wine and spirits industry will not be helped by falling oil prices says Moody's

Published:  16 January, 2015

The global drop in oil prices will only have a "modest" impact on consumer spending and the retail industry in the European Union, according to a new report from Moody's the credit rating agency.  revised its pricing assumptions in a newly published report that looked at the global impact the reduction in the cost  of oil could have and found there would have a 'modest' impact to consumer spending and retail within the EU.

The global drop in oil prices will only have a "modest" impact on consumer spending and the retail industry in the European Union, according to a new report from Moody's the credit rating agency.

It has this week revised its pricing assumptions in a newly published report that looks at the global impact the reduction in the cost  of oil is having on business. Whilst it claims the US will have a boost from increased consumer spending that will not be replicated in the UK.

Sven Reinke, European retail analyst at Moody's said: "In Europe, lower oil prices will reduce retailers' transportation and distribution costs slightly, but the region's high tax burden on fuel -and the US dollar's strengthening against the euro and the UK pound -means prices at the pump will move far less than oil prices. European retailers will benefit from consumers' modest energy savings, but the effects will be far smaller than in the US."

It is unlikely that wine distribution and logistics costs will drop drastically in the EU.

The report looked at at how a sustained period of lower oil prices would affect numerous industries around the world.

Globally, the report found industries for which fuel is a direct and significant cost will see a positive effect from lower oil prices, as will consumer-dependent businesses more generally, since lower gasoline prices mean consumers will have more cash to spend on other items.

However, the effect will be far more muted in the EU than in other markets like the US.

 Lorenzo Re, a consumer durables analyst at Moody's, said: "In Europe, the benefit from declining oil prices will be more limited."

Oil prices have remained relatively stable hovering around US$110 from 2010 until the middle of last year. About six months ago the price of oil began declining and has since more than halved falling below US$50 a barrel.

Crude oil closed yesterday at US$46.25 a barrel.

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