For the first time in a decade, the United States economy is said to be back on track. Despite some quarters claiming that a crash is inevitable, many economists are saying that the U.S. will once again be the driving force behind world growth in 2015.
Six years after the nation’s financial system nearly bottomed out, and five years since the Great Recession is said to have ended, the U.S. economy saw an annual expansion rate of 5 percent in the third quarter of 2014, according to government data. This is the swiftest of any quarter since 2003. While that pace is predicted to ease a bit, a survey conducted by the National Association for Business Economics shows the U.S. economy is still on track to grow by 3.1 percent going into 2015.
There are several reasons for the optimism as we prepare to enter the new year. For one, the significant plunge in oil prices has cut the cost of gas nearly in half at the pump, leaving more money in the consumer’s pocket to spend on furniture, cars, and other items. According to the U.S. Energy Information Administration the average household savings could be up to $550 per year. It’s a simple equation: more money means more purchases to stimulate the bottom line of our economy.
Oil prices aren’t the only thing strengthening the U.S. economy, and perhaps the most heartening fact of all is that unemployment rates are steadily dropping in most areas of the country. Not only have businesses been making investments into their facilities and software structures, the home building industry is expected to grow this year as well, ensuring that jobs in these sectors are likely to continue to grow. According to the Bureau of Labor Statistics, employers are on track to add the most jobs in 15 years in 2014, and the debt-to-income ratio is the lowest it’s been since 2002. Add to that the decrease in mortgage rates and down-payment requirements leading many to believe that new home purchases and new home builds are going to see an increase in the coming months.
The down side to all of this good news? The world’s economy isn’t seeing such positive economic signs as the U.S.
China has seen a transition from investment to consumption, slowing its economic growth percentage by nearly a half. Japan has officially entered a recession following a significant increase of sales tax, which negatively impacted the number of consumer purchases. Both Japan and Europe will be lucky to expand even 1 percent economically in the coming year, though the fall in oil prices will help them to recover some of their stunted growth. Russia is seeing its own economic crisis as the ruble slowly decreases in value, and because the country relies heavily on its oil exports, it is expected to get worse.
As bittersweet as it may be globally, the U.S. economy is back, and as long as consumers continue to have increased faith in the American dollar, it looks like we are finally seeing the financial struggles of the past six years ease.
[Image courtesy of U.S. News]