Missing Pieces to the Recovery Puzzle

Recovery

The United States seems to be on the verge of recovery following a disastrous few years that sent stock prices into the ground, made investor interest all but disappear, and dramatically decreased to value of real estate assets. The country has show improvement in the last 10 straight quarters – so why does it feel like we’re not there yet? Experts say there are several reasons why the economy hasn’t recovered as quickly as we had all hoped and that the usual indicators of improvement might not be as valid in this situation.

Most experts agree that the following factors have the largest contribution to slowing the economic recovery: cautious consumers, poor income growth, and political uncertainty.

Cautious consumers – companies are learning that if you don’t offer customers deals, they’re much less likely to purchase. Most consumers have become extremely mindful of their spending and aren’t dropping cash like they did before the recession

Poor income growth – we’ve seen small gains in employment figures over the last couple of years, but most agree that we won’t see a real bump in income growth until a budget decision has been made. Until then, corporations will continue to be weary of making investments in the market.

Political uncertainty – loosely tied to the budget decisions prohibiting proper income growth, political uncertainty is having a negative effect on investor confidence. Some argue that wars and other national security concerns have kept the country in a state of upheaval and prevented the US from recovering properly.

As consumers, we’ve been getting mixed signals. Auto sales, for example, are well above the annual rate of 15 million, which is typically a good indicator of how the economy is doing overall. Economists disagree to a certain extent – they argue that car manufacturers have built up an enormous surplus during this recession and are now offering vehicles for prices much lower than we would have seen otherwise in an effort to clear out some of the excess. We have also seen an increase in new construction, which in the past has eventually led in increased consumer consumption (gotta buy new furniture for the new house, etc.) – but not this time around. Consumers are very cautious when it comes to spending money and have proven that if there’s not a deal they feel warrants the purchase, they’ll save the cash for something else.

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