By numerous indicators, economy coming up roses

December 04, 2017

Keywords: Asset Management

Just in time for the busy buying holiday season, consumers are spending more on goods and services, the most recent evidence that Americans' personal economic situation - and the national economy as a whole - is as good as it's been in several years.

All told, consumer spending rose nearly $39 billion in October, the most recent month for which data is available from the Bureau of Economic Analysis. Personal savings, meanwhile, totaled $457.3 billion, with the personal savings rate at 3.2 percent, up slightly from 3.1 percent in September, which at the time was a 10-year low.

Economy playing out as it did in 1990s
When personal outlays gain ground and saving falls, it's usually an indication consumers are feeling more confident about their financial situation. As noted by The Wall Street Journal, the savings rate has been below 4 percent for eight consecutive months, a trend that's strikingly similar to what was happening in the late 1990s, when stock valuations were at considerable heights and the unemployment rate quite low, hovering between 4 percent and 5 percent. Since May 2016, the national jobless rate has been below 5 percent, dropping to a 17-year low of 4.1 percent in October, according to the Labor Department's estimates. The stock market, meanwhile, is on a record roll, with the Dow Jones Industrial Average smashing 63 all-time highs in 2017 alone. It recently crossed the 24,000 point milestone, one of three other 1,000-point growth streaks this year.

Speaking to the Journal, financial expert Paul Ashworth attributes the current propitious economic climate to greater wealth held by U.S. households.

With Americans on firmer financial footing, confidence levels have risen sharply. In November, the Conference Board's Consumer Confidence Index reached 129.5, up more than points from 126.2 in October.

"Consumer confidence increased for a fifth consecutive month and remains at a 17-year high," said Lynn Franco, director of economic indicators for the Conference Board. "Consumers' assessment of current conditions improved moderately, while their expectations regarding the short-term outlook improved more so, driven primarily by optimism of further improvements in the labor market."

Joblessness cut in half since 2012
More than a million jobs have been added to the economy by employers in 2017, which has halved the jobless rate tracing back to 2012, when unemployment was 8.2 percent for five consecutive months, according to the Department of Labor.

The era of solid growth isn't solely found in the U.S., as improved conditions are evident in several national economies. Using forecasting data from the International Monetary Fund, economist Torsten Slok told the WSJ that out of 192 countries, just six economies are expected to contract next year. Should this come to pass, it would be the smallest amount in recorded history.

William Dudley, president of the New York Federal Reserve, told the Journal that the fundamentals of the U.S. economy are robust, a favorable sign that growth will continue.

"Not only do I think the economy's in good shape today, I think the economic expansion is going to continue for some time," Dudley explained.

GDP revised higher to 3.3 percent
Even in revised estimates, economic conditions are proving to be better than originally thought. In 2017's penultimate quarter, gross domestic product rose 3 percent the Bureau of Economic Analysis initially reported in early November. But in revised estimates, GDP actually gained ground to the tune of 3.3 percent. Income levels also rose, up 2.5 percent during the third quarter compared to 2.3 percent during the immediately previous three-month period.

The U.S. economy is an amalgam of various indicators that paint a macro picture of how things are going in terms of growth. Here at Miles Capital, we use these insights to help our clients with asset management and improving the investment process. Check out our clients and services section at the top of our homepage to learn who our clients are and why they've placed their trust in our strategic guidance ever since our founding.

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