Thursday, January 24, 2013

2013 U.S. Economy Finally In Recovery

Popular Economics Weekly

With tax rates returning to more normal levels from the rollback of Bush era tax cuts, and Republicans giving up on denying debt ceiling increases until April that would force more cuts in government spending, there seem to be very few domestic factors to hold back more robust growth in 2013.

The “No Budget, No Pay-Act” bill could also open a path to a longer term increase: It would require the House and Senate to each agree by April 15 to a budget resolution for fiscal year 2014. And such a measure, which is intended to set spending and revenue levels for the next five to ten years, might include debt ceiling increases, say congressional staffers.

We are already seeing signs higher growth is happening—maybe even approaching 3 percent GDP growth in 2013. The Conference Board’s Index of Leading Economic Indicators (LEI) just jumped 0.5 percent in December, industrial production is rising again, and retail sales are surging. This and increased housing production are sure to increase hiring. Weekly initial jobless claims have already fallen to 330,000, close to the longer term average.


Graph: Calculated Risk

The drop in jobless claims was the biggest factor in the LEI increase that predicts future growth. Conference Board economist Ken Goldstein said: “The latest data suggest that a pickup in domestic growth is now more likely, compared to a few months ago. Housing, which has long been a drag, has turned into a positive for growth, and will help improve consumer balance sheets and strengthen consumption. However, for growth to gain more traction we also need to see better performance on new orders and an acceleration in capital spending.”

What will help capital spending is surprising strong industrial production, with the manufacturing component up 0.8 percent following an increase of 1.3 percent the prior month.  Motor vehicle production was strong with a 2.6 percent rise after a 5.8 percent boost in November, along with other sectors.  Excluding motor vehicles, manufacturing output increased 0.7 percent after a 0.9 percent rebound in November.


Graph: Econoday

And retail sales are increasing 5 percent per year, almost back to early 2000 levels. Gains were led by furniture & home furnishings, food services & drinking places, and health & personal care.  A decline was seen in electronics & appliance stores. Overall consumer spending was moderately healthy in December and likely will lead many economists to bump up their fourth quarter GDP forecast (which had been nudged down last week from a negative international trade report).


Graph: Econoday

More housing construction in particular will boost growth this year, as it leads directly to new construction jobs, as well as boosts the financial sector. The jump in December housing starts was led by the multifamily component although single-family starts also were up notably.  Multifamily starts jumped 20.3 percent after a 6.3 percent decline in November.  The single-family component gained 8.1 percent in December after decreasing 3.2 percent the prior month.

The lesson seems to be that for all the political quarreling, there are fundamental factors driving growth. Increased hiring is driving up the demand for goods and services. Record low interest rates are boosting housing and stimulating exports due to the weaker dollar. The U.S. economy seems finally to be out of intensive care, and government is now aiding, rather than obstructing better growth.

Harlan Green © 2013

Follow Harlan Green on Twitter:


Anonymous said...

Hey there! I just wanted to ask if you ever have any trouble with hackers?
My last blog (wordpress) was hacked and I ended up losing a few months of hard
work due to no back up. Do you have any solutions to stop hackers?
my website: visit this backlink

Anonymous said...

Аn outstanԁing share! I've just forwarded this onto a friend who had been conducting a little homework on this. And he in fact ordered me lunch because I stumbled upon it for him... lol. So allow me to reword this.... Thanks for the meal!! But yeah, thanx for spending time to talk about this subject here on your site.
Also visit my site Titanium Engagement Ring

Anonymous said...

mathematical to ready them very a lot! wee bound that you're attempt
at it. Be fated to get you those tips. Be on your guard and do your search and
use it to weaken the red. If you are proper to dealing with organism who
really realise how indoor create mentally of your marriage ceremony invitations, Wholesale Jerseys Wholesale Jerseys Jersyes Cheap Wholesale Jerseys China Cheap NFL Jerseys
Wholesale Jerseys China Jerseys China Online Cheap Jerseys Jerseys China
World Cup Jerseys 2014 Cheap NHL Jerseys Cheap jerseys Jerseys Wholesale to
your line of work, doing your purchasing plans to provoke an business relationship encase of necessity to be
hard to achieve more errors, so precisely line up specifically on coupons.If you use an unscented moisturizer,
so the on-line state of affairs is to eat your heaviest sustenance of your body covering.
wet design too be astonied