Skip to main content
Publish date:

More Good Signs for the U.S. Economy

Consumer confidence and optimism in the labor market should keep things humming in early 2020
“I think the economy, as it relates to consumer spending, has been on a great ride and probably has the ability to continue for a while, which will benefit all of us in the marine industry.”
 - Barry Berhoff,
 Shurhold CEO

“I think the economy, as it relates to consumer spending, has been on a great ride and probably has the ability to continue for a while, which will benefit all of us in the marine industry.” - Barry Berhoff, Shurhold CEO

A key measure of consumer confidence climbed to a five-month high in January, and the Federal Reserve left its benchmark interest rate unchanged, both good signs for the U.S. economy in the early months of the new year.

The Conference Board’s Consumer Confidence Index rose to 131.6 from an upwardly revised 128.2 in December.

“Consumer confidence increased in January, following a moderate advance in December, driven primarily by a more positive assessment of the current job market and increased optimism about future job prospects,” Lynn Franco, senior director of economic indicators at The Conference Board stated in a press release. “Optimism about the labor market should continue to support confidence in the short term, and as a result, consumers will continue driving growth and prevent the economy from slowing in early 2020.”

The Conference Board also reported that its Present Situation Index, which is based on consumers’ assessment of current business and labor market conditions, rose from 170.5 to 175.3. The Expectations Index — based on consumers’ short-term outlook for income, business and labor market conditions — increased from 100 in December to 102.5 in January.

Also according to The Conference Board in January, those who say business conditions are “good” increased from 39 percent to 40.8 percent; those who say business conditions are “bad” fell from 11 percent to 10.4 percent.

A separate measure of consumer confidence also rose. The University of Michigan reported that its Consumer Sentiment Index rose to 99.8 in January from 99.3 in December, both of which are solid numbers.

“The maintenance of consumer sentiment near cyclical peak levels is surprising, given the overall slow pace of economic growth, which was accompanied in January by renewed military engagements in the Mideast, an impeachment trial in the Senate, and a fast-spreading coronavirus,” Richard Curtin, chief economist of the university’s Surveys of Consumers, stated in a press release. “The resilience of consumers is remarkable and due to record-low unemployment, record gains in income and wealth, as well as near-record lows in inflation and interest rates.

“The data currently point toward consumer spending maintaining positive growth in the economy as a whole,” Curtin added.

The Federal Open Market Committee, the Fed’s rate-setting body, left its benchmark interest rate in a target range of 1.5 percent to 1.75 percent.

“The committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions and inflation near the committee’s symmetric 2 percent objective,” the panel stated in a press release after its meeting in late January. “The committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.”

Fed chairman Jerome Powell, in a news conference after the meeting, said he was concerned about the impact the coronavirus could have on the economy. “Uncertainties about the outlook remain, including those posed by the new coronavirus,” Powell said. “It’s a very significant issue. We are very carefully monitoring the situation.”

The Fed cut interest rates three times last year in an effort to keep the economy on track for growth.

For Barry Berhoff, CEO of Shurhold Industries, gauging the health of the economy is a difficult task. “I think the economy, as it relates to consumer spending, has been on a great ride and probably has the ability to continue for a while, which will benefit all of us in the marine industry,” Berhoff says. “The concern is long-term, and the national debt. One day it will accrue to the point that it can no longer be ignored, and I worry about the economic crash that will cause.”

When he assesses the economy, the two indicators he watches most closely are consumer confidence and consumer spending. “So far our indicators are leaning mildly positive for 2020,” he says. “There is always concern about uncertainty in an election year and how that affects consumer spending.”

Shurhold makes, designs and distributes marine detailing supplies and accessories. It is based in Palm City, Fla. “Shurhold is going to be 47 years old this year, and sales have increased year over year almost every single year,” Berhoff says, adding that 2019 “falls right in line with our past performance, and 2020 is off to a nice start.”

Berhoff says Shurhold’s export sales con­tinue to grow. “Tariffs and international regulations are the biggest hurdles in further expansion,” he says. President Trump’s tariffs have had an effect. “The few things we do import have been hit hard. To compound the problem, because the import process takes so long, many items that were planned and ordered long before the tariffs were enacted got hit once they landed here in the U.S. This greatly affected profit margins on these items or components.”

The Conference Board reported that its Leading Economic Index, which tries to predict future economic activity, fell 0.3 percent in December to 111.2 after increasing in November and declining in October.

“The U.S. LEI declined slightly in December, driven by large negative contributions from rising unemployment insurance claims and a drop in housing permits,” Ataman Ozyildirim, senior director of economic research at The Conference Board, stated in a press release. “The LEI has now declined in four out of the last five months. Its six-month growth rate turned slightly more negative in the final quarter of 2019, with the manufacturing indicators pointing to continued weakness in the sector. However, financial conditions and consumers’ outlook for the economy remain positive, which should support growth of about 2 percent through early 2020.”

The U.S. Commerce Department reported in its initial estimate that the nation’s gross domestic product rose 2.1 percent in the fourth quarter last year. For the full year, the economy grew 2.3 percent, which was below the 2.9 percent growth achieved in 2018.

Steady but slower growth characterized 2019. “If we think of the economy as being roughly in equilibrium, the natural question is what it would take to shock the system,” Eric Winograd, senior economist at AllianceBernstein, told CNBC. “For the moment, I think negative risks are more likely than positive ones. But with the economy as stable as it is, it would take a very large shock indeed to materially alter the economy’s basic trajectory.”

The Congressional Budget Office is predicting GDP growth of 2.2 percent this year. “We anticipate that consumer spending, spurred by rising wages and household wealth, will remain strong,” CBO director Phillip Swagel told a U.S. House of Representatives committee Jan. 29. “We also expect business investment to rebound as several of the factors that weighed on businesses last year abate.”

The Commerce Department reported that consumer spending slowed in December, rising a moderate 0.3 percent after a 0.4 percent increase the previous month. Personal income growth also slowed in December, rising 0.2 percent after a 0.4 percent gain in November.

“The consumer says don’t count on me in 2020, and their support will be critical for growth this year,” Chris Rupkey, chief economist at MUFG in New York, told Reuters.

Inflation rose slightly. The core Personal Consumption Expenditures Price Index, the Fed’s preferred inflation gauge, rose 1.6 percent in December, up from 1.5 percent a year earlier.

The core rate strips out the volatile food and energy sectors. Even with the increase, the PCE index remained below the Fed’s target rate of 2 percent.

Small business confidence slipped in December, although the National Federation of Independent Business says the mood in the sector ended the year “historically strong.” The federation says its Small Business Optimism Index fell from 104.7 in November to 102.7 in December.

“December marked the end of another banner year for the small business economy, as owners took full advantage of strong consumer spending, and federal tax and regulatory relief,” NFIB chief economist William Dunkelberg stated in a press release. The year 2020, he said, “is starting out with a solid foundation for continued growth, two years into the Tax Cuts and Jobs Act that’s providing fuel to grow small businesses and their workforce.

“What really matters to small business owners are issues directly impacting their bottom lines. Currently, their biggest problem is finding qualified labor, surpassing taxes or regulations,” Dunkelberg added. “Two years ago, Congress and the president provided real, significant tax relief to small business owners. Now, owners are anxious to have their tax cuts made permanent.”

In the housing sector, builder confidence in the market for newly built single-family homes remained at a historically high level in January despite slipping slightly.

The National Association of Home Builders reported that its NAHB/Wells Fargo Housing Market Index fell 1 point, to 75, from December. The NAHB reported that the January and December readings marked the highest sentiment levels since July 1999.

“Low interest rates and a healthy labor market, combined with a need for additional inventory, are setting the stage for further home-building gains in 2020,” NAHB chairman Greg Ugalde stated in a press release.

NAHB chief economist Robert Dietz stated in a press release: “With the Federal Reserve on pause and attractive mortgage rates, the steady rise in single-family construction that began last spring will continue into 2020. However, builders continue to grapple with a shortage of lots and labor, while buyers are frustrated by a lack of inventory, particularly among starter homes.”

The NAHB index that charts the traffic of prospective buyers increased one point, to 58, which was the highest level since December 2017. The gauge that measures current sales conditions fell three points, to 81, and the component that measures sales expectations in the next six months held steady at 79. Any number above 50 indicates that more builders see conditions as good rather than poor.

Sales of new single-family homes saw an unexpected drop in December. The Commerce Department reported that sales fell 0.4 percent, to a seasonally adjusted annual rate of 694,000.

In the home resale market, the results were much better. The National Association of Realtors reported that sales of existing homes rose 3.6 percent in December, to a seasonally adjusted annual rate of 5.54 million.

For all of 2019, the NAR reported that existing-home sales totaled 5.34 million, the same as in the previous year. Sales in the South were up 2.2 percent and offset declines of 1.8 percent in the West and 1.6 percent in the Midwest. Sales in the Northeast were unchanged.

Lawrence Yun, the NAR’s chief economist, stated in a press release that home sales fluctuated a lot in 2019.

“I view 2019 as a neutral year for housing in terms of sales,” he stated. “Home sellers are positioned well, but prospective buyers aren’t as fortunate. Low inventory remains a problem, with first-time buyers affected the most.”

The NAR reported that the median existing-home price in December was $274,500, up 7.8 percent from December 2018. Prices rose in every region. The price increase marks 94 straight months of year-over-year gains. 

This article originally appeared in the March 2020 issue.


Suntex Adds Superyacht Facility

The investment group adds Seahaven Marina, which can accommodate vessels up to 250 feet.

Newsweek Honors Brunswick Corp.

It’s the second consecutive year that the magazine named the corporation to its list of America’s Most Responsible Companies.

Southern Marinas Adds to its Portfolio

The company announced its acquisition of Tims Ford Marina and Resort in Winchester, Tenn., its seventh transaction this year.

Groupe Beneteau Acquires Portugal Facility

The builder adds the Rodman Lusitania shipyard to support demand for powerboats under 40 feet.

Digital Dealership Dashboard for Marine Dealers

The Parker Business Planning digital platform for marine dealers will be introduced next week at MRAA Dealer Week in Austin, Texas.

Back and Forth and Back Again

As the world waits for the pandemic and its economic effects to subside, a new virus variant emerges.

Suzuki Crew Cleans Florida Shoreline

Executives, staff and families removed more than 40 bags of trash from Florida’s Courtney Campbell Causeway as part of the company’s Clean Ocean Project.

Seattle Boat Show: Full Speed Ahead

The largest show in the Pacific Northwest is set for its 9-day run with a new location and robust seminar format for 2022.