An old New England saying is that a
farting horse never tires. Could it
be true for the economy as well? I was reminded of this saying when
reading the
article below by First Trust Advisors.
Maybe the fits and starts and hiccups the economy is seeing should be seen as good news and we should change our focus. What do you think?
Turn
on the television, pick up the newspaper, search the Internet and you
will find story after story about Greece, JP Morgan, austerity, the
labor force, student loans, California, the G-8, or the Facebook IPO.
Just about every bit of the coverage is negative.
Replace that list with Tunisia, Egypt, China, oil prices, foreclosures,
deleveraging, and Ireland; or Dubai, tsunami, earthquake, copper, Baltic
Freight Index and Portugal…and you get the picture. For three years,
the news has been relentlessly bearish.
And yet, amid all this, our “plow horse economy” keeps moving forward –
through the stumps and rocks and mud. It’s certainly not I’ll Have Another,
who, with one more win, can take the Triple Crown – a measure of
strength, courage and greatness. But it ain’t headed for the glue
factory either.
Consumer spending is at a record high (whether measured on a real or nominal basis). Retail sales were up in April for the 21st
time in the past 22 months. In terms of consistency, this rivals the
1998-99 streak of 16 straight monthly gains, a period everyone looks
back on as a boom. Real (inflation-adjusted) retail sales are up 4%
from a year ago. If this is the new normal, let’s have more of it.
Private payrolls are up 26 consecutive months, hours of work are rising,
and consumers’ financial obligations are the smallest share of income
since 1984. No wonder sales of autos and light trucks are up almost 10%
from a year ago.
Meanwhile, business investment is soaring. While overall industrial
production is up a robust 5.2% from a year ago, the production of
business equipment is up a stellar 12%. This is why we believe
productivity growth, which has slowed down the past couple of years, is
destined to get a second wind.
Capacity utilization hit 79.2% in April, equal to the average of the
past twenty years. What this means is that firms have an increasing
incentive to build out capacity by investing in plant and equipment. At
the same time, profits and balance sheet cash are at record highs. In
other words, prospects in the business sector look good.
And, despite all you hear about banks not lending, commercial and
industrial loans are up 13.6% in the past year. The story about banks
not lending to companies is getting very stale, the bottom for these
loans dates back to late 2010.
And to top it all off, housing is clearly on the mend. Starts are up
30% from a year ago. Every major region of the country shows growth in
the past twelve months, for both single-family and multi-family
homes. Residential investment (home building) has been a positive
factor for real GDP growth in each of the past four quarters and looks
poised to do it again in Q2.
What we have on our hands is a sustainable, self-reinforcing economic
recovery. It could be better. What’s holding it back is bad policy
choices coming out of Washington, DC. Government spending is robbing
the economy of potential and uncertainty about future taxes and
regulation is a wet blanket.
Amazingly, the plow horse keeps moving forward. That’s the real news
here - unending pessimism being defeated by the American entrepreneurial
spirit.
Comments
You can’t fix stupid but you can vote it out.
Everyone will agree that businesses are over-regulated in some ways. But, just blaming it all on one administration seems disingenuous to me. Do you have any info from what could be considered impartial sources to back up this incessant clamor about the Obama Administration being the over-regulator of all times?
It’ll cost the industry $315.1 million to comply and $44 million a year on an ongoing basis. So it’s a huge expense. All of the research to date shows that putting caloric information on menu boards has no impact on consumers’ eating habits. We already post it in our restaurants. It’s available on the Internet.
It’s just -- it’s a complete waste of money and it’s a complete waste of effort. And it’s just a huge example from the restaurant industry as to over-regulation that’s useless. In fact, we would have more money to invest in job-creating activities instead of regulation compliance activities. We have got – we’ve got the Polygraph Protection Act, the Genetic Information Nondisclosure Act. We’ve got an 11-page single-spaced list of regulations that you have to comply with to operate and open a simple quick-service restaurant chain, 57 categories of regulations, 11 pages long. I especially like this one. And I don’t care that it is Glen Beck. It does not mean it is not factual!!! You can watch it; it’s only 60 seconds long. http://www.youtube.com/watch?v=l2sb1H68fAg
Obama has actually written fewer regulations than GWB so far. Obama’s White House approved 613 federal rules during the first 33 months of his term. There were 643 cleared by President George W. Bush’s administration according to an Office of Management and Budget statistical database.
The number of significant federal rules, defined as those costing more than $100 million, has gone up under Obama, with 129 approved so far, compared with 90 for Bush, 115 for President Bill Clinton and 127 for the first President Bush. I think the argument is to why keep writing so many. Why not repeal some. I know as times change some new regulations will be needed. But lets keep a leash on this during these economically stressed times. And lets not have another 4 years of bigger government and more regulations under Obama.