Money IQ: The U.S. Economy 2013-So Far So Good

Money IQ

The U.S. Economy 2013-So Far So Good

The U.S. economy has been fairly resilient so far in 2013, despite facing many challenges. The fiscal cliff, the combination of tax increases and government spending cuts that began at the start of the year were largely averted.

The debt limit was increased, avoiding a contentious debate with potential negative ramifications for the economy. Finally the $85 billion in spending cuts that were agreed upon in 2011 as part of the debt ceiling reductions started in March of this year and are beginning to be felt across the economy.

The global economic environment remains weak, although we are seeing some signs of strength coming out of Asia. Europe remains the big question mark as Cyprus reminded us that the Eurozone debt crisis is not over yet.

The resilience in the U.S. economy so far this year is the result of many factors, including aggressive stimulus from the Federal Reserve, the positive effect of higher home prices and a rising stock market. While these positive factors reduce the odds of recession and contribute to the strength of the equity markets, the aforementioned challenges remain.

We continue to except gross domestic product (GDP) growth around 2 to 2.5 percent for the remainder of 2013. Focus will continue on the monthly jobs numbers as an indication of how strong the economy really is. While the unemployment rate has fallen some in recent months, that has largely come from workers leaving the workforce and is typically not indicative of a strong labor market.

Consumers continue to spend at a moderate rate and retail sales are up about 4 percent for the year. Leading indicators have continued to point to a continued – yet sluggish economic growth, not recession, and continued modest increases through 2013.

Editor’s note: Eric Loucks has more than 30 years of experience in the financial services industry, and has been an Investment Officer with the LANB Investment Group for the past six years. Loucks grew up in Los Alamos, spent the majority of his career with Charles Schwab in San Francisco and Phoenix and returned to New Mexico six years ago.

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