Broadly speaking, the U.S. economy continues expanding nicely.
When looking at leading economic data from the 50 states, 45 are in expansionary mode. Below is a sample of five states in different regions of the country. We typically see a synchronous decline prior to any trouble. The worst state today is North Dakota, shown in green, due to less fracking activity and the heavy reliance on oil.
Consumers make up 70% of the economy. Sales are as steady as they have been for the last seven years. Below we show retail sales adjusted for both population and inflation. It continues to expand at an annual rate of 3%. Prior to a recession (grey bars), sales flatten out or decline as consumers cut back on discretionary items.
Ten years ago, the first sub-prime borrowers began defaulting on mortgages. Today, mortgage delinquency rates continue declining to the lowest levels of the decade. Home price indices are flirting with new highs, despite the home ownership rate being near a 60-year low. In surveys of prospective home buyers, expectations of new purchases and actual sales were above the levels from last year.
Like many others, we are hoping for clarity from Congress and the administration soon on tax changes, both from the actual policy and timetable. Ideally, the legislation would be complete in 2017 and apply to this year, but 2018 is quite possible. A new corporate and income tax plan would increase growth with greater spending power for companies and consumers. A fiscal spending package targeting infrastructure would also be a plus to keeping the positive economic momentum going.
This material is based on public information as of the specified date, and may be stale thereafter. Aurum Wealth Management Group and/or Aurum Advisory Services has no obligation to provide updated information on the securities or information mentioned herein. Actual events may differ from those assumed and changes to any assumptions may have a material impact on any projections or estimates.