Retail Observer

RETAILOBSERVER.COM SEPTEMBER 2018 46 O ne great perk of being a professional speaker is the interaction I get with people all over America. It gives me a perspective on the mood of consumers, their confidence in our economy, and how invested they are in the future of their own financial wellbeing. We all worry about the unknowns—things like the current business cycle, inflation, recession, and whether we'll have enough money for our retirement. I have produced a prodigious volume of statistics on the growth of the American economy over the past nine years and have been a champion of a positive outlook for your businesses. I am glad to report that little has changed during this cycle, and now I would like to explore the second half of 2018. The Commerce Department reported on July 16 that retail sales increased by 1.9 % in the first quarter of this year as consumer confidence moved to its highest level since November of 2017. The bottom line is that retail sales were up .8 % for June to $ 502 billion in the month. These numbers are sustainable throughout the second half of 2018 as low unemployment, a minimal increase in wages and additional liquid capital due to the tax cuts from late last year are making business conditions better. GDP came in at 4.1% for Q2 of this year, which is the best performance since 2014 and is a signal that the U.S. economy is performing up to expectations. Economists are quick to point out that one of the biggest impacts on GDP last quarter was foreign buyers jumping all-in on purchases of American exports in Q2 to beat the tariffs. The best example I found was in sales of American soybean exports, which were up over 50 % . Barron's pointed out that soybeans accounted for half of the 4.1% growth rate in GDP for the quarter. America produced 213,000 jobs in June, a very positive sign for the U.S. economy, but we are still stuck with soft wage growth. Unemployment jumped up to 4% in June from 3.8 % the previous month as more people joined the labor market. In a normal economy, unemployment below 4.5% would trigger a much larger increase in wages, and would in turn push inflation above the 2% limit set by the Federal Reserve. So in one sense, it is a strong indicator that we still have some capacity to grow above the trend line without pushing inflation beyond the limits set by the Fed. This, of course, puts less pressure on the Federal Reserve to feel compelled to push up interest rates to a level that could scuttle our current expansion. Our current Fed Chief, Jerome Powell, said before the Banking Committee, "With appropriate monetary policy, the job market will remain strong and inflation will stay near 2% over the next several years." His remarks were a positive affirmation that the Fed chairman is ebullient about the current strength of the U.S. economy. Powell continued, "For now, the best way forward is to keep gradually raising the federal funds rate in a way that keeps pace with a strengthening economy but does not raise rates so high or so fast that it weakens growth." Of course, an overreaction to inflation can be a catalyst that starts a recession, and economists now believe that the Fed could limit its rate hike cycle in the second half if inflation remains under control. I do think that the central bank will raise rates two more times this year. In the past nine years we have witnessed record job growth, no recessions, a quadrupling of the Dow Jones, strong consumer spending, high levels of consumer confidence, and positive growth in GDP in 34 of the past 36 quarters in our economy. What's not to like about the opportunities that abound in America? AMERICA'S SECOND HALF 2018: ECONOMY LOOKS TO STAY ON TRACK Joe Higgins Economic Viewpoint RO Joe Higgins—with more than 44 years in the appliance industry—speaks at conventions, seminars, and sales meetings across America. His work includes presentations on the United States economy, leadership, creating a high-performance culture, healthy teams, and customer service. Visit www.q4qwithjoe.com.

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