Fall 2016 issue of Horizons

This can be a very awkward time to get an accurate impression of the economy’s performance – at least if one listens to the ranting and raving of the political classes. The fact is that voters in general react to what they are afraid of and respond to the gloomiest of messages. This is especially true of candidates that are challenging the status quo. They want to paint a very distressing picture so that voters will want to “throw the bums out” and start anew. This leaves the casual observer with a very negative impression of the economy; but, fortunately, the alert readers of this publication are anything but uninformed and are certainly not casual observers. Recent data has been generally more upbeat than it has been and certainly more positive than the campaigns would have us believe. Several major economic indicators are up and that is more than we have seen in over a year. Granted, some are flatter than not, but at least they are not crashing into negative territory. The better news is that among the positive indicators are some that are considered forward looking and that sets up further improvements in the months ahead. Among those that are trending positively are new automobile/light truck sales. The caution here is that while it is still trending positively, the rate of growth has slowed down considerably and it is unlikely the old pace will return. A record 17.5 million cars were sold in 2015 and thus far 2016 has not been quite as robust. The pace is still faster than it has been in many years and this contributes to the improvements in the industrial production numbers. An even better indicator at the moment is housing stats as they have continued to grow and this is a sector that bolsters many others. Home prices have risen, which has been good news for the existing homeowner and it may allow them to buy new abodes they have had their eyes on. The only cautionary note at the moment is that permits have started to slow a bit. The question now is why. The demand for new homes is strong enough but there are issues with finding enough workers to build these new homes. This has been a significant factor as far as asking for new permits – there is a backlog of demand in many cities. The industrial metal numbers also improved as there has been a demand increase from both the sectors that use the material and from investors that are using the metal commodities as a hedge. This is not the same story as far as steel is concerned, but the decline in consumption is not yet all that drastic. There has been a slowing in vehicle manufacturing and only a slight increase in construction related demand.

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