Good signs for economy


Two important, but very different signs in recent days suggest that the global economy is strengthening and perhaps not headed to another dip like some people have been saying. In the U.S., incomes rose more than consumer spending (which also rose) and that means Americans are saving more and paying off debts. Although, economists always say that people need to spend for the economy to prosper, it is very important for the long term sustainability and growth that Americans have a solid amount of savings in place and a low debt level.

Another interesting sign comes from the auto sector across the pond, in Germany. Luxury car makers, Mercedes, BMW and Audi are all increasing the output of their factories by adding shifts and cutting summer breaks. All three companies are seeing higher than expected demand throughout the world, which is meaningful economic news not only for Germany or the auto sector, but for the global economy in general. It is particularly meaningful that these three companies are seeing high demand levels because these cars are all very expensive and for people to spend that kind of money they have to 1) have it AND 2) feel confident that they will not lose their job or see another slump in business.

Although most people can not afford one of these cars (at least not brand new), it does mean that the greater economy throughout the world is improving and that benefits everyone, even if you can only afford a Ford or Nissan. BMW recently launched a new 5-series vehicle and already they are sold out, world wide. There is currently a 3-4 month wait for these cars which shows how far we’ve come from the worst of the recession about a year ago when car sales dropped like a rock.

Lately, some people have been saying that the recession is nowhere near over and we will see a ‘double dip’, meaning this economic climb will turn back south soon. However, these two pieces of data suggest the opposite is true and that we are actually headed up in a steady way. Obviously, two data points alone are not enough to jump to any conclusions, but if these patterns hold and more data points begin to agree with these ones then it will become clear that we will not see another drop in economic activity. Hopefully, this will be the case because this recession was long and hard for many people.