Some economic indicators took a downward turn last month and of course the media has focused on these negatives. But there have been many more positive trends and let’s take a look at the “good stuff” happening in the US economy.
• The Index of Leading Economic indicators (see definition below) turned upward at the end of June and points to slowly expanding economic activity in the coming months
• Payroll data reflects modest improvement and is displaying a typical pattern of jobs recovery that occurs after a serious slump
• There were 117,000 net new jobs added in July and Unemployment claims have fallen from their high in April of 2009
• Cities, states, counties and federal entities are still shedding jobs but the private sector is adding jobs—this is good news for a more healthy economy
• Unemployment rate for college graduates is only 4% compared to national average of 9%. Getting a college degree is a smart thing to do!
• Fiscal stability of most states has greatly improved and revenues are now in line with expenses. Most states have balanced budgets. And have made the necessary cuts.
• Vehicle sales have been sluggish and pulling down Gross Domestic Product (GDP) (see definition below) growth mainly due to the parts shortage caused by the Japanese Tsunami. However, that is improving and we should be back to 13 million in sales per month for the last quarter of 2011.
• The US GDP growth is forecast to be close to 3% for the remainder of the year.
• Consumers have significantly shed debt loads and consumer credit is surging. This is a key driver in our consumer driven economy.
• Housing affordability is at an all-time high
• Interest rates expected to be very low for at least next two years, allowing more folks to take advantage of extremely low real estate prices.
• The US adds approx. 3 million new bodies each year. New housing starts have averaged 1.5 million per year. Considering that we have only been adding approx. 500,000 new housing units, the demand will soon exceed the supply. Once all the foreclosures and short sales get off the market, the demographics prove that a strong housing recovery will occur.
• Retail sales are higher now than before the crash of 2008. The consumer has more disposable income and is spending. But the consumer is also being wise and saving—the saving rate is 5.4%.
• Inflation is not expected to be an issue for several more years as promised by the Fed Reserve at yesterday’s meeting.
• Companies are reporting strong corporate earnings. Much of these earnings are being derived from overseas sales which are expected to persist. China, India and other emerging countries have a huge appetite and capacity to purchase our goods and services. And earnings drive the market in the long run. Right now, the S%P is selling for 11 times earnings and that is dirt cheap! The outlook for the stock market is good.
Index of Leading Economic Indicators
An index that is compiled by the Conference Board, a private-sector consulting firm. The index is designed to indicate the future direction of economic activity. A rising index signals that economic activity can be expected to increase in the near future
Gross Domestic Product
The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
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