Retail Observer

RETAILOBSERVER.COM OCTOBER 2016 40 O ne thing I can predict with certainty, we have had forty- seven recessions in America, and one day we will have our forty-eighth, but not this year. In August, the S&P 500 was in record territory, defying the experts who were calling the downturn in January, the beginning of another recession. Hedge fund managers were predicting the end of the seven year bear market and tough times for American consumers. It sure made for great sound bites and gave the doom and gloom writers new life. The turnaround was startling as the leading economic indicators began to move into positive territory and eliminate worries of a contraction. The information began to rapidly roll off the presses, first it was improving employment numbers and then growth in housing. Automobile sales were strong, oil had a slight rebound and the appliance industry was up about 4.5% in the second quarter. The Commerce Department reported that the economy created 547,000 jobs in June and July and pushed the layoff rate to 1.1%, the lowest since November 2013. This was the best increase this year and we now have had 73 consecutive months of jobs gains, a record for the U.S. economy. The real highlight of this report was that the average hourly earnings increased by a significant eight cents and that workers put in more hours. The Labor Department said that hiring was broadly based across the most important sectors in the U.S. economy, a sign that business growth is still on track this year. America is a consumer based economy and in July we had good news from the Conference Board's monthly report on consumer confidence. The index was at 97.3 in July and 97.4 in June, so mostly unchanged month to month but it's clear that Americans are feeling better about their financial condition and willing to increase spending. This number is up nearly 60 points since December of 2008 and is an indication that Americans are more optimistic now than at any time in the last eight years. Remember the old adage, when it coming to spending, it's not the numbers that are important but rather how we feel about the numbers. Housing is an extremely important sector, especially for the subscribers of The Retail Observer. Last month's Commerce Department report indicated that home resales jumped to a nine year high in June and the single family housing starts moved up at the same pace. In addition, the Case-Shiller composite index of 20 metropolitan areas rose 5.2% so far this year, this adds to the wealth effect for consumers, an important consideration on the trajectory of home remodeling projects. Other big news for retailers was that consumer spending increased 0.5% in May and June and spending is now annualized at 4.2% . Consensus among economists is that consumers will continue at this pace through year end and that would mark the best spending in two years. Consumer spending accounts for 73% of Gross National Product. GDP came in very weak in the first half but some economists are predicting growth of 2.6% in Q2 of 2016. Oh sure, we can find a myriad of distressing problems in the U.S. but by most measures the American economy is still the envy of the world. The 2016 U.S. GDP will come in around $18.5 trillion dollars, just ten years ago it was $13.7 trillion dollars. We have had slow but consistent growth over the past ten years in housing, automobile sales, manufacturing, appliances, furniture and many other areas. Everything we have to look forward to over the next decade will be significantly better than what we have experienced since the recession in 2008. So don't panic, Brexit had limited impact on America, the election will be over soon and the tailwinds are blowing in our favor for now. SLOW BUT CONSISTENT GROWTH: A HALLMARK OF TODAY'S ECONOMY Joe Higgins Financial Forecast Joe Higgins began his career at GE with a degree in economics, joined Whirlpool as national director of sales, and retired from Whirlpool in 2012 with 43 years in the appliance industry. Joe speaks at conventions, seminars & sales meet- ings across America, including presentations on the U. S. economy, leadership, creating a high performance culture, healthy teams, & customer service. www.q4qwithjoe.com. RO

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