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Randy Cray column: National economy showing signs of life

7:43 PM, Jun. 15, 2013  |  Comments
Randy Cray
Randy Cray
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The national economy finally appears to be showing signs of life.

After several years of painful restructuring, many economic indicators suggest that the national economy is on the mend. Let's be clear, this does not mean economic activity is going to expand at some phenomenal rate, nor does this mean there are no dangers that could derail the recovery. While the tide is coming in, it still is subject to the ups and downs of individual waves.

I would like to discuss the major economic indicators that suggest the economy is improving. The most important is Gross Domestic Product, which has grown for 11 consecutive quarters. GDP measures the total dollar amount of all new goods and services produced in the U.S. over a period of time. Typically, the time period selected is a year or one quarter. During 2011, the real annualized growth rate of GDP grew by 0.4 percent in first quarter, 1.3 percent in second, 1.8 percent in third, 3 percent in fourth quarter and 2.2 percent in first quarter 2012. The trend suggests that there is a modest amount of momentum building in the economy.

Many other economic indicators also are following this pattern of improvement. Here is a lengthy list of the improving economic indicators: industrial production in our nation's factories, consumption spending by households, investment spending by business firms for factory, plant and equipment, real disposable income earned by households, durable goods orders for long lasting products, the consumer price index used for measuring inflation, the unemployment rate, non-farm employment figures, hours worked by the nation's labor force, corporate profits, borrowing by nonfinancial firms, interest rate levels, S&P 500 Stock Index, retail sales, consumer confidence, money supply growth and the Index of Leading Economic Indicators.

I should point out that while these indicators of the economy are improving, many have yet to reach their pre-recession levels. As a consequence, the rate of improvement can be questioned. Even with this caveat, the data does suggest the national economy is growing. But is the economy entirely out of the woods?

Unfortunately, the answer is no. There are a number of factors looming over the nation that could derail our slow, but steady, recovery. Depending on how Washington resolves some important issues, damage can be done to the economy. Issues that need to be addressed include: slowing the growth rate of health care expenditures; fixing the Social Security system; resolving the U.S. government budget deficit; the potential of the Syrian conflict spreading and engulfing the Middle East and the ongoing cyber war being waged on the U.S. economy. In addition to the above, the European sovereign debt crisis seems to be far from over. The effects of a prolonged deep recession in Europe would certainly impact the U.S. economy. Most economists believe that the austerity measures taken by European nations have already created a recession in Europe and this is affecting U.S. exports to the region.

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