The Economy 2016?

Welcome to the New Year, by now you have all set goals to achieve your 2016 plans and I believe we are going to get some help from the economy. Let’s review some of the events of 2015.

We made it through the deep freeze in the Northeast in the first quarter, which negatively impacted our GDP. Later in the year, the strength of the U.S. Dollar impacted corporate earnings and that was in part to blame for a significant stock market correction in late August.  China had a near melt down this past summer that caused global concerns and our number one trading partner, the Euro Zone, was in the midst of an economic crisis. The gloom and doom writers had a great time predicting the apocalypse and while it felt like our world was imploding the impact was just temporary.

The news was not all negative, consider that by the time this article hits the January issue of the Retail Observer, the Federal Reserve will most likely have raised interest rates in December and it will mark the first increase since 2008. This is an important signal, it means the Fed believes our economy is now strong enough to absorb a rate increase. The major influencer of this move was the positive momentum in the labor markets. Our economy, according to the Fed Chairman, Janet Yellen, “has created 13 million jobs since 2010 and these numbers are sustainable throughout 2016.”

The other good news is that wages appear to be up about 2.6% through October of 2015. Think about it this way, with 13 million new jobs, rising wages and lower applications for unemployment benefits, it would appear that this is the right time to raise rates in advance of a serious threat of inflation.

I am happy to report that the Stock Market had a strong comeback from the August correction, the Dow Jones is up .14% through mid-December, the S&P 500 is up 1.57% and the NASDAQ is up 7.82%.  The consensus among economists is that the stock market will see another decent performance in 2016 with technology being the growth industry again this year.

The housing market has continued to show strength. In fact, according to Realtor.com last month, “the pace of existing and new home sales in 2016 are expected to reach 6 million for the first time since 2006 and new home sales are seen increasing 16 percent.” Bottom line is that we are going to build 1.2 million new living units in 2016 and we believe that the housing industry can sustain these numbers over the next five to ten years.  This is a positive trend in our industry as growth in housing portends purchases of furniture, appliances and electronics.

With rising wages and unemployment now at 5%, a seven year low, there has been an uptick in consumer spending. Q2 was up 3.6% and Q3 was up 3.2% in 2015, these were two of the best back to back quarters since 2007. With the price of gasoline at a national average in America of $2.03 at the time of this writing, consumers have additional resources to spend in 2016 and will allow us to see a continued expansion.

Consumer spending drives about 73% of Gross Domestic Product growth in the U.S. Economy. Last year we had a 3.9% GDP increase in the second quarter and a 2.1% increase in Q3. And while this is not stellar growth, it does signal that the economy is still expanding. Consensus among economists is that we should see GDP grow at 2.6% in 2016.

So keep looking forward, I don’t see any downside over the next twelve months. Despite what you hear, America is still the greatest nation on the planet.