U.S. Economy & the Housing Market

August 2017

The U.S. economy shows no signs of slowing down.

A big recovery of GDP growth during the second quarter that was in large part fueled by consumer spending has brought back optimism. GDP growth was recorded at 2.6% in the 2nd quarter, a much better outlook than the revised 1.2% during the 1st quarter.

The Dow also reached a milestone after closing over 22,000 for the first time ever sustained by higher corporate profits and consumer spending.

“Earnings are growing and are growing faster than anybody thought. That alone will drive stock prices up,” says Brad McMillan, chief financial officer at Commonwealth Financial Network.

“We [also] see improving consumer confidence and business confidence. When investors are more confident when consumers are more confident when businesses are more confident, then typically you see stock prices rise,” McMillan adds.

Consumer confidence is up 3.8 points in July to June, reaching 121.1 (1985=100). At a 16 year high for consumer confidence! Overall consumers foresee the current economic expansion as continuing well into the second half of the year.

The increase in consumer confidence can be attributed to the strong job market. July saw the addition of 209,000 jobs, most notably jobs were added in the leisure and hospitality, education and health service, professional and business service and in manufacturing. Unemployment has also fallen to a 16 year low, a mere 4.3%. The tightening labor market has pushed wages up 2.5%; wages will continue to increase as the labor pool gets smaller and businesses will start competing for workers.

Added jobs and consumer confidence has also pushed the housing market forward. The sale of new, single-family homes rose 9.1% in June 2017 over June 2016. While existing home sales only increased 0.7% in June over the same month in 2016, this can be attributed to a low supply and price growth that is restraining budgets. The housing market will continue to grow despite facing constraints such as low inventory supply, fast pace price growth and the lack of land and labor.

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