January 1, 2014 in Nation/World

U.S. economic indicators point to healthy 2014

Kevin G. Hall McClatchy-Tribune
 

WASHINGTON – For the first time since 2007, the U.S. economy is poised to start the new year on a strong footing amid a flurry of signs that point to a firming recovery.

From sales of cars and homes to hiring and the booming stock market, there are reasons to finally believe that the coming year will be markedly better than the last, and that a fits-and-starts-recovery will hit its stride.

“I would argue that we’re coming out of rehab finally in the United States,” said Ethan Harris, a top economist for Bank of America Merrill Lynch.

The U.S. economy grew at a sizzling 4.1 percent annual rate in the third quarter, the Commerce Department said Dec. 20. That’s stronger than previously thought.

Aided by the Federal Reserve’s bond buying to stimulate risk taking and broader economic recovery, stocks closed 2013 on a tear, posting their best performance in almost two decades.

In his final forecast as the chairman of the Federal Reserve, Ben Bernanke said Dec. 18 that the Fed expected growth of 2.8 percent to 3.2 percent in 2014. That’s a bit rosier than the 2.5 percent to 3 percent that most mainstream economists project.

It’s also a stronger forecast than that projected by Martin Regalia, the chief economist for the U.S. Chamber of Commerce, who’s “fairly optimistic” about growth in the range of 2.8 percent to 3 percent.

Automobile sales are one area already reflecting improved consumer confidence.

Analysts expect sales to have exceeded 15.6 million vehicles in 2013, up 8 percent over 2012, according to the car sales reference company Kelley Blue Book.

They anticipate sales increasing another 4.3 percent in 2014, to 16.3 million units. That would be the first time the figure has been above 16 million since 2007, the year before the financial crisis and the Great Recession.

The outlook for the manufacturing sector, an outsized one when it comes to hiring, is cautiously upbeat.

“When I talk to manufacturers about (2014), they tend to be mostly optimistic,” said Chad Moutray, the chief economist for the National Association of Manufacturers. “They see their sales and production picking up.”

One reason for Moutray’s optimism is improvement in the housing sector. Manufacturing for housing has picked up as new-home starts heat up and more people remodel existing homes. Prices of existing homes rose in 2013 at their fastest pace in eight years, according to the National Association of Realtors.

Homebuilders report that new-home starts were expected to finish 2013 at about 900,000, a healthy clip, though still well below pre-crisis levels of about 1.6 million. The National Association for Business Economics forecasts about 1.1 million new-home starts for this year.

Sales of existing homes, however, are a wild card. The combination of rising home prices and climbing mortgage rates may make affordability an issue for buyers. The National Association of Realtors expects the rate for a 30-year fixed-rate mortgage to go above 5 percent by the middle of 2014. It was 4.56 percent last week.

On a brighter note, the outlook for U.S. exports is an additional factor that suggests stronger economic growth in 2014, said Nariman Behravesh, the chief economist for forecaster IHS Global Insight.

Exports will benefit from improvements globally. China’s blistering growth rate has eased, not necessarily a bad thing, but fears of a deeper slowdown didn’t materialize. Japan, he noted, is emulating the stimulus measures that the U.S. Federal Reserve deployed to help bolster growth. The European Union seems to be pulling out of its two-year funk, which was caused by a crisis in government debt among many of its members.

These improvements “will sort of set the stage for fewer headwinds, stronger tail winds, going forward,” said Behravesh.


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