Sunday, August 4, 2013

Economy: A Tale Of 3 Engines

(Drivebycuriosity) - It looks like that the U.S. economic upswing is gathering speed. At least last week`s economic news is very encouraging. We learned that U.S. consumer spending, the backbone of the economy, rose 0.5 % in June (calculatedriskblog). We also got reports that U.S. manufacturing and service sector both grew faster in July (

The data show that the economic upswing in the U.S. got more sustainable. The economy benefits from a continuously rising consumer spending, which is driven by 3 engines:

1. Steady growth of the job market:  We learned that the U.S. economy grew 162.000 new jobs in July and that jobless claims fell last week to 326.000 — the lowest level since January 2008! (  Hence the disposable incomes are rising and are animating more spending (income effect).

2. The stock market climbed to a new all-time high. The continuous stock market gains - the S&P 500 rose almost 20% year to date -
are increasing the wealth of most Americans and encourage them to consume more (wealth effect 1).

3. Home prices in the U.S. are recovering: Year-over-year, home prices climbed by 12.%. Home owners feel wealthier and get another inspiration to spend more money for consume (wealth effect 2).

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