In this section you will be able to follow the discussion regarding the US economy, unemployment and jobs, US budget deficit, US debt burden, Government entitlements (Social Security & Medicare), and government impact on the economy (financial reform, government regulations, housing markets, and crumbling infrastructure -transportation).

U.S. Economy Glides Back to Steady, Modest Growth Path

from The Wall Street Journal,

Economy enters ninth year of expansion, growing at a 2.6% annual rate in the second quarter.

The U.S. entered the ninth year of economic expansion in steady but unspectacular fashion that shows little sign of abating. Gross domestic product, a broad measure of goods and services produced in the U.S., expanded at a 2.6% annual rate in the second quarter, the Commerce Department said Friday, a rebound after a tepid start to the year. The figures repeated a familiar pattern of weak winters followed by a stronger spring and summer, leaving overall growth subdued. “The economy is on cruise control. Unfortunately cruise control is about 2%,” said Diane Swonk, founder of DS Economics. The U.S. emerged from recession in mid-2009. Since then, GDP growth has averaged 2.1%. In contrast, growth averaged 3.6% during a 10-year span in the 1990s and 4.9% during a nearly nine-year stretch in the 1960s, the only two expansions with longer durations. Slow and steady has produced a long stretch of job creation and left the economy on mostly stable footing, with few signs of the kind of excess that in the past have derailed long periods of growth. In the 1960s, for example, runaway inflation led the Federal Reserve to raise interest rates and curtail growth. Today, broad measures of inflation are historically weak. The price index for personal-consumption expenditures—the Fed’s preferred inflation gauge—rose at an annual rate of 0.3% in the second quarter. That is well below the Fed’s 2% target. Core prices, which exclude volatile food and energy costs, increased 0.9% at an annual rate during the quarter.

After the 1990s stock boom, a tech bubble burst, crashing markets and ultimately sending the economy into recession and an expansion that didn’t produce many jobs. There are signs today that stocks are fully valued, one potential risk for investors. But the stock boom lacks the fervor of the 1990s, when outsize internet company valuations proved unsustainable. Absent such forces, underlying economic growth appears locked in for the foreseeable future, with both households and businesses helping to propel modest growth. Forecasts for the remainder of the year are mixed. J.P. Morgan expects a second-half growth rate of 1.75%, NatWest Markets around 2.5% and Capital Economics 2.5% to 3.0%. The Federal Reserve in June estimated full-year GDP growth would register at 2.2%. Forecasters in The Wall Street Journal’s July survey of economists pegged the odds of a recession at just 15%, little changed from last month and down 22% from a year ago.

Against that backdrop, stocks and corporate profits are marching higher and volatility in markets is low. The Dow Jones Industrial Average is less than 200 points shy of the 22000 mark after rising 0.15% Friday 21830.31. On Friday, the biggest U.S. energy companies reported robust profits. Exxon Mobil Corp. nearly doubled its net income compared with a year ago and Chevron Corp. saw profits jump to $1.45 billion in the second quarter. Earlier in the week, Caterpillar Inc., the world’s largest heavy-machinery maker, delivered an upbeat earnings report amid growing demand in China’s construction sector and a revitalization of the mining industry. “The outlook is that businesses and consumers are becoming more confident in the future,” Christopher Martin, chairman and CEO of Jersey City, N.J.-based Provident Financial Services.

More From The Wall Street Journal (subscription required):

365 Days Page
Comment ( 0 )
Leave a Reply