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Monday, April 21, 2014

Positive Economic Indicators Point to a Brighter 2014



The economy looks bright for much of the next year according to the Conference Board, Bloomberg’s poll of leading economists, and the International Monetary Fund. After a prolonged decade of slow down any positive market news is welcomed. However, with increases in multiple measurements one can get a better feeling for growing trends and how those trends will impact national investment opportunities. At present, the market appears to be increasing in growth and opportunity for both the U.S. as well as other nations which could encourage further growth.

The Conference Board used broad based measures that included the labor market, interest rates, factory orders, stocks price, and construction. The Conference Board’s Leading Economic Index for the U.S. rose .8% in March to 100.9 indicating a substantial increase in the U.S. economy (1). The economy has put away its winder mitts and gloves and significant improvements in the market are possible.

The Conference Board was not the only one to make optimistic predictions. Bloomberg polled 42 leading economists and came to the conclusion that an advance of .7 (estimates ranged from .3 to 1) in the leading index could be realized (2).  Six of the ten leading index estimates are higher and it is projected that there will be an economic increase of 2.7 % this year when compared with 1.9 percent in 2013.

Acceleration in the global economy is also expected. According to the IMF, global growth is expected to realize an increase of 3.7% in 2014 and 3.9% in 2015 (3). It is believed that there are still some risks due to poor economic management and shaky internal structures. Emerging economies will receive a push from demands in the advanced economies that will help with stabilization.

The outlook is bright over the next two years. Assessment of the economy requires reviewing indicators from different vantage points and perspectives. Generally, the more measurements that can be incorporated into an assessment the better the overall assessment assuming these measurements are not just “noise”. A single increase in one sector of the economy doesn’t have broad implications or validity in the same way that multiple measures across different sectors of the economy have.

The multiple indicators may also raise optimism on a number of different fronts. Optimism is important for business investment and consumer spending that support growth. When people feel that the economy will grow, and their personal financial well-being is positive, they are more likely to invest and spend the nest eggs they have been putting away. This means they believe that there will be more opportunities in the future as well as more opportunities and respond by rewarding the market with investments and purchases.

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