We are now well into the 3rd quarter of 2015 and the future economic picture for the U.S. is about as clear as mud! 2013 began with almost zero growth in the first quarter, but quickly gained momentum ending the year relatively strong with GDP growth of 4.5% in the third quarter and 3.5% in the final quarter.
2014 repeated a similar pattern with negative GDP growth early in the year, and then rebounding with three consecutive quarters of growth at 4.6%, 5% and 2.2%. The stable economic growth over the final three quarters of 2014 helped boost economic confidence and had most people feeling much better about the general state of the economy.
However, once again the economy slowed in early 2015 with a slightly negative growth rate and posted a mediocre 2.5% increase in the 2nd quarter. The range of growth rates and bouncing from strong growth to contraction has kept everyone guessing, even the economic gurus. For the time being, it does not look like anyone will be able to get a firm grip on what economic environment we will be dealing with from quarter to quarter.
There are several very strong indicators suggesting the economy is rapidly improving such as unemployment, credit availability and real estate prices. Credit availability continues to be restricted in the real estate sector but car loans, credit cards and personal lines of credit are very accessible. Expanded levels of available credit have a significant positive influence on the economy, as they allow for a much higher level of economic activity and investment.
Real estate prices have made huge gains in the last couple of years in a majority of areas across the nation and unemployment is lower than we have seen in almost eight years. While the aforementioned paint a sunny picture for the near future, unfortunately, some of their impact is muted by stagnant middle class income levels, increasing cost of living and low levels of savings on a broad scale.
As you can probably see, there are many conflicting forces at work in the current economy. Your chances of figuring out if the economy is on the way up or down over the long term are probably about as good as hitting it big at a casino.
Crunching economic data can be helpful and meaningful at times. However, perhaps the biggest issue holding the economy back from a dramatic shift upward is a crisis of confidence. People feel generally uncertain about the long-term environment and even uneasy about short-term prospects in some cases.
This is holding back investors from making commitments, prevents business owners from planning and slows the spending of resources.
The economy never moves in a straight line and there are always data points that conflict. However, we need the middle class to feel good about the economy again in order to achieve real stability and growth. If economic confidence returns among the majority of middle class families, we would likely see enormous economic gains not seen in many years.