Economy Marches On

Leading Economic Index

The Conference Board recently reported that its Leading Index report had increased in March for the 24th consecutive month. The basic message sent is that the US economy is growing and will continue to grow into the future. And there are a couple of interesting facts to consider from the report.

To begin, this is the first time the Index has grown this consistently and this long since the early 1970's. My guess is that part of this phenomena is due to the fact that the economy was at such a low point and had so much farther to regain than in earlier recessions. But it also shows a very strong and stable increase that will be a foundation for future expansion in spite of all the short-term challenges and media fears.

The other point that struck me is that one of the driving pieces of data for the March increase was the housing permits component. The other driver was the interest rates component. Even though the housing related industry is the largest drag on the economy, it is growing stronger and pressing the economy to a better position.

The World Economy

The world trade volume in February was at a record high level fueled by strong manufacturing and production. The strong world data shows that the recovery from the financial crisis is complete and spread widely throughout the globe.

Here at home, manufacturing is on a record-breaking pace and leading the US economy back toward health. Technology jobs are exploding and competition for technology employees is beginning to resemble the old boom days of silicon valley.

Financial companies are reporting surprisingly strong profits in this country and in selective other countries around the globe. Their gross revenues are down but the balance sheets are trimmed down and the cash flow is being managed more efficiently.

The Shape of The Curve

All of these signs point to a bit more sober and well founded base for the economy to further expand. This is the part of the cycle that I watch in relation to an evolving future graph. If the start is slower and methodical and at a lower trajectory, it suggests to me a longer and more sustainable growth period. Many of us have been hoping for a steeper increase and faster recovery which in the end could mean a sharper spike with a responding steeper angle back down the economic slope.

This slower recovery can be linked to foreclosure or more people with credit damage. We can believe that the world can't live without 65% home ownership. We can all fear for the lowering value of our homes and decide that it will continue to destroy our economy.

The data suggests something different. There is a great deal of the US and World economy that beats to a different drum. That data says that houses are shelter and not investments and that production and trade is the center focus.  Wealth is derived from the addition to and management of these processes. And these processes will continue to expand and profit in spite of foreclosed homes or declining house values.

The Pleasing Results

There is a basic positive note in this for the Real Estate Industry. Jobs create the affordable home much more soundly than finance programs. Wealth made in other areas will tend to return to desire for more homes and better homes. Longer solid employment will resolve past credit injuries. People with money in their pockets will always want a comfortable place to live and raise their families.

This dynamic is solid. Time and a consistent growth in the economy will absorb housing inventory. It will create demand for new homes and support the process of improving older homes. Builders understand this and have increased building permits in spite of the threat of more foreclosures coming onto the market.

Time and a growing economy will cure the sins of the past.