Five reasons to be optimistic about the economy

The economic outlook has become steadily gloomier over the last couple of months. A major deceleration of growth is already under way, and the risk of a dip back into recession is much higher than it was at the beginning of the summer. Financial markets have fallen steadily, reflecting that risk, as has President Obama’s approval rating.

A roaring recovery is probably not on the way, but here are five reasons that a slow-and-steady recovery is likely to continue states the Washington Post.

Savings. Credit. Manufacturing. Housing. Trade.

1. Savings
The good news: More households are readjusting their spending patterns to match their incomes than was previously realized. That means consumers should be freer to spend more in the months ahead, even if the savings rate remains unchanged.

2. Credit
There is gradual healing going on in the financial sector that is causing modest, slow improvement in loan availability for households and businesses.

3. Manufacturing
The industrial sector is actually holding up okay, despite the softening in overall growth. July industrial production was up 1 percent, and early indicators are that expansion held up last month.

4. Housing
This may seem an odd reason for optimism, given the horrendous data on July existing home sales and new home sales released last week. But those numbers have a silver lining. Basically, housing activity has shrunk so much that it would be hard for it to be much of a drain on future growth.

5. Trade
The economy was dragged down to an unprecedented degree in the second quarter by a steep rise in imports. Even though exports increased, imports rose much faster, subtracting 4.5 percentage points from the gross domestic product. Had trade as a whole been a net neutral, GDP growth would have come in at a healthy 5 percent annual rate, and the current hand-wringing over the economy would be more subdued.

Published by Stout Law Firm

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