Its time for September’s Economic outlook and believe it or not, it is promising for once as the economy has already hits bottom. The interest rates continue to remain low, the housing market picked up quite a bit and the consumer spending index has been very promising and positive.
Let’s take a look at the economy at a glance and follow up to last month’s points of interest. We last discussed the CARS program also known as “Cash For Clunkers” and the budget behind it. The program was successful and has ended, the total cost exceeding 3 Billion dollars was well worth it. The government’s idea of driving people in showrooms worked well and delivered with increased sales, demands and increased availability of credit to compensate the demand for cars. More credit, more cars, and more purchases.
The second point of reference on last month’s economic outlook was the housing market, which again showed major signs of improvement with a 5% boost in new home sales and a 3% boost in used home sales. This once again helped the economy by being the 6th consecutive month of increases, increased sales and demand means increased values across the board.
For this month, I see a significant increase in consumer spending and the re adjustment of the price index market. What does that mean? The simple explanation is that goods (cars, homes, electronics) were all priced well below market due to lack of demand. For the past 6 months, the need to move inventory had driven prices down and kept them down as the country was simply not spending any money. This has changed in the past month, we have now seen a significant increase in the pricing of goods as people have started gaining confidence in the market. A simple way to look at this is through the car sales market as it is highly dependent on supply and demand. Pricing increase is the first item to watch out for in September’s economic outlook.
Our second point of interest this month is banking stocks which have made a huge return despite the banking industry still being considered shaky, despite some additional small bank closures the market with big banks has changed. The economy will dictate if the increase in stock prices are simply fluff or real long term growth. The fact remains that despite struggling times, the banks are showing great profits which is highly unlikely but a mere strategy to acquiring investors which then drives the prices up. There is no real quality to those stocks yet in my opinion and the fluff should go away through 2009 and early 2010.
Our final point for September will be a close watch on interest rates; we discussed inflation earlier and understand the impact of bailing out firms with liquid cash during a market re-adjustment (recession). Despite the Feds claiming that no such rate hike is in the pipeline for now, the simple truth is that the government is for profit and as the consumer spending increases and prices on your everyday goods start to rise, they will have to control it and they do that by increasing rates. So please take the necessary steps in the next 2-3 months to make sure that you have a cushion as your variable rates might start to climb come early 2010.
Lets review September’s Economic Outlook:
- Banking stocks watch
- Increased consumer spending on tangible goods
- Interest rates and inflation monitoring
That’s all we have for this month’s economic outlook, we hope you enjoyed it and look forward to following up next month with more good news.
Related posts:
