Brian Wesbury et al. at First Trust Advisors point out that amid all of the media reports of economic "gloom and doom," our “plow horse economy” keeps moving forward, demonstrating that the relentless media pessimism is "being defeated by the American entrepreneurial spirit." Here are some examples from First Trust of how our "plow horse economy" is moving forward:
1. Consumer spending is at a record high, on both a real and nominal basis. Retail sales were up in April for the 21st time in the
past 22 months, rivaling the 1998-99 streak of 16
straight monthly gains, a period everyone looks back on as a boom. Real retail sales are up 4% from a year ago.
2. Private payrolls are up 26 consecutive months, hours of work
are rising, and consumers’ financial obligations are the smallest share of
income since 1984. No wonder sales of autos and light trucks were up in April almost 10%
from a year ago, and at the highest level for the month of April since 2008.
3. Business investment is soaring. While overall
industrial production is up a robust 5.2% from a year ago, the production of
business equipment is up a stellar 12%.
4. Capacity utilization hit 79.2% in April, equal to the average of the past twenty years. What this means is that firms have an increasing incentive to build out capacity by investing in plant and equipment. At the same time, profits and balance sheet cash are at record highs. In other words, prospects in the business sector look good.
5. Despite all you hear about banks not lending, commercial and industrial loans are up 13.6% in the past year. The story about banks not lending to companies is getting very stale, the bottom for these loans dates back to late 2010.
6. Housing is clearly on the mend. Starts are up 30% from a year ago. Every major region of the country shows growth in the past twelve months, for both single-family and multi-family homes. Residential investment (home building) has been a positive factor for real GDP growth in each of the past four quarters and looks poised to do it again in Q2.