With the calendar year 2014 just barely out of the starting blocks, a number of positive factors are combining to lend credence to the development of an outstanding rebound. This follows the lackluster multi-year comeback, inching out of the great fiscal recession (2008-2010). Even academic economists, generally hesitant in their forecasts, are seeing brighter prospects ahead, actually upping their previous growth projections. According to the median estimate of 70 economists in a mid-January survey, they have upped total 2014 growth from a previous 2.6% to 2.8%, which is still below the overall 3% plus which this column calls for. Some of the early indicators supporting my more optimistic contentions are as follows:
1) A number of regional reports indicate manufacturing is picking up. The Federal Reserve Bank of New York’s general economic index jumped to 12.5 from 2.2 the prior month, reflecting an increase in orders and capital spending. The Philadelphia Fed bank increased to a three-month high in January, as total sales and employment showed steady improvement.
2) U.S. industrial production rose for a fifth month in December, capping the strongest quarter since 2010; while capacity utilization inched up accordingly. Industrial output, the key to overall manufacturing comeback, rose 6.8% in the final three months of 2013, the most since the second quarter of 2010. Even home construction ended the best year for the industry in 2013, the most promising year since 2007. Although housing starts fell to an annualized 999,000 rate in December from 1.11 million in November, this should improve in the current quarter, with the advent of improved weather conditions.
3) While the automotive sector is looking forward to another 16 million cars and trucks emanating from U.S. factories, both American and foreign brandnames, equally promising are export activity, anticipating worldwide liquid natural gas shipments, oil derivatives, and even the possibility of crude oil, as “shale fracking” picks up the pace from current and pre-planned expansions. Despite the continued harassment from EPA and allied private pressure groups, the sheer momentum of this addition to billions of revenue dollars, as well as the tens of thousands of new jobs, will prove overwhelming.
4) The relative calm of the unexpected joint compromise effort by both Houses of Congress to fend off debt ceiling confrontations, and credit agency downgrades, will give a vast number of businesses and industry the confidence of not being sandbagged by federal interference in midstream.
This alone may instigate some release of the more than $1.5 trillion now reposing in the coffers of expansion-minded privately-held corporations. This will likely provide the stimulus of a long-frozen hold-back, by tens of thousands of companies ready to respond to awakening opportunities. With consumer confidence indicating reasonable optimism, such expansionist tendencies may accelerate even more as growing confidence is rewarded by a less intrusive federal government interference.
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