It looks like 2014 could inaugurate a new era of economic optimism in the US. Spurring on this positivity is the recent passage of a budget deal. After an almost default on government debt in 2011, a 16-day government shutdown in October, and absolute gridlock in Congress, a budget deal has finally passed and things are looking up. It looks like fear has finally been replaced by reason. Let’s take a look at all the things that are going well.
It’s essential to remember that the consumer is the engine behind economic acceleration, driving more than 70% of GDP. Luckily, consumer confidence is on the rise and by all accounts, the aforementioned confidence will continue to rise through 2014. Partly driving this increase in consumer confidence is a decline in consumer debt.
The aggregate debt/disposable income ratio has dropped from 125% at the 2007 peak to 100%. Essentially, the 2002- 2007 credit expansion has been reversed. Therefore, households have more disposable income and are all around better positioned to participate in the economy and purchase more goods.
The real estate market is recovering from the crash, slowly but surely. Foreclosures are on the decline, having returned to normal levels, and fewer Americans are underwater on their homes. Home prices in many areas should continue to rise in 2014. There is no wonder that economic optimism is here to stay.
The pool of available labor is shrinking to a five year low and labor, in many sectors are in demand, including technology, construction, transportation services, restaurants, and durable goods manufacturing. This decline in unemployment is partly because of a notable upswing in manufacturing, which means more jobs at home and less abroad. It also looks like wages will rise in the coming year.
While the US federal deficit was a staggering 10% of GDP just four years ago, today it’s less than 4%. If all goes well, it should be at just 3% by the end of next year, a substantial improvement.
All in all, 2014 is shaping up to be a strong, economic year. Whether you are considering investing in a new business venture or would like to purchase new real estate, now is the time to do it.
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