Economic conditions continue to show signs of progress. On the upside, interest rates continue to remain low in the face of global uncertainty allowing U.S. consumers and businesses to borrow money more cheaply than has been historically possible. As an added bonus, increased oil production within the U.S. and globally has resulted in lower energy prices for consumers which has modestly boosted consumption. On the downside, slowing growth in China, weakness across Europe and political instability in the Middle East and other emerging markets, has resulted in a strong dollar and weaker global demand for U.S. products. While this makes imports less expensive for U.S. consumers, multi-national companies are exporting fewer U.S. made goods and services as a result.

As was the case last quarter, most of the key U.S. indicators that we follow are continuing to post positive results year-over-year. Employment is gradually and, more importantly, consistently improving. Job openings are at a 13 year high and monthly job growth is running at its highest level since 2006. Manufacturers continue to gear up for anticipated future growth. The construction industry has improved from year ago levels but is giving off mixed signals of late, showing strength in new sales and confidence and weakness in housing starts and permits. While this near-term situation bears watching, we believe the construction industry as a whole, has recovered to a more “normal” business cycle.

While global issues, primarily political in nature, cloud the picture in European and emerging market economies, we anticipate the U.S. economy to continue to improve through the end of the year and into 2015 and act as the global economic engine. However, if the Eurozone, China and Emerging Market economies continue to deteriorate, the U.S. economic recovery could be at risk.

Here is a summary of some important economic indicators, showing historical information and areas of potential risk that could threaten the economic recovery in the U.S.A.


Mostly SunnyRetail Sales – Cloudy with a chance of rain. Year-over-year, Retail Sales are up 4.3% which is in the ho-hum category. However, the employment outlook is looking better. Since our last quarterly report, overall job growth has been strong and looks to continue to improve into the future. 

Unfortunately, this has not translated into strong Retail Sales numbers. Consumers are showing caution ahead of the 4Q holiday season. And, since retail sales accounts for a third of overall consumer spending, there is a chance for continued weakness in the 4th quarter and into 2015.


SunnyWholesale Trade – Mostly sunny.  We continue to see strength in the numbers for Wholesale Trade.  Year-over-year it is up 5.8%.  While we see some slowing quarter-over-quarter, both Durable Goods Orders and Non-Durable Goods Orders continue to expand, only at a slower rate.  We expect continued growth through the end of 2014 and into 2015.  


SunnyManufacturing – Sunny.  Manufacturing has been moving higher since our last quarterly report.  It continues to gain on record highs since surpassing February’s pre-recession highs and has now risen for the 13th consecutive month.  As might be expected, with growth comes the need for employees.  As of September, Manufacturing employment growth has expanded for the 12th consecutive month.  We expect continued year-over-year improvement through 2014 and into 2015.  


SunnyInterest Rates – Sunny.  Interest rates remain low mainly as a result of global economic and political concerns.  The economic recovery we anticipated last quarter has given way to fears of faltering economies in Europe and China.  As a result, the world has flocked to the U.S. bond market as a safe haven for their assets.  This in turn, has made our bonds more expensive, lowering interest rates.  Given the current global turmoil, or better, the lack of any resolution to the situation, we anticipate interest rates will remain low in the near term.  Expect the Fed to begin raising interest rates sometime in mid-2015.  


SunnyCapital Goods New Orders – Sunny.  After a slow couple of months, the Business-to-Business activity appears to be accelerating.  New Orders increased to 5.0% above 2013 levels and it appears more acceleration is ahead.  The latest quarter came in 8.0% above the corresponding three-month period in 2013.  This is the most robust quarterly gain in over two years.  We expect sales to continue to grow into 2015.  


SunnyConstruction – Mostly sunny. Housing has been somewhat of an anomaly over the past few months. Year-over-year comparisons however paint a positive picture of the industry. For new homes, buyer traffic has risen for five consecutive months to highest level since 2005. Home Builder confidence continues to trend positive as well. Inventories of homes for sale, both existing and new, are still low and new homes are on the market for only three and a half months versus the four to five months for a “normal” market.

Considering how deeply the industry was affected by the Great Recession, full recovery is not expected until sometime in 2016.


Mostly SunnyInternational – Rain. The global recovery is at risk. The impact of the Russia/Ukraine conflict has become apparent in the Eurozone. Output has now declined in 3 of the last 4 months and is now below year-ago levels. Germany’s industrial output dropped again, this time by 4.3%, and economic sentiment has now fallen for the 10th consecutive month.

Adding to the concern over the global recover is China. It recently reported GDP at 7.3% which is the slowest it has been in three years. Government sources are considering implementing their own version of Quantitative Easing in order to spur economic activity. Any additional setbacks could impact the recovery being seen in the U.S.


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