Is this the beginning of real improvement in the economy?
Several signs point to modest improvements, and on many fronts. U.S. consumer credit increased significantly just before the holidays, offering a ray of hope for the economy. Bloomberg reported that consumer borrowing in the U.S. surged in November by the most in ten years, showing households are optimistic enough to take on debt and banks are willing to lend. According to Federal Reserve figures, consumer credit increased by $20.4 billion, the biggest jump since November 2001, to $2.48 trillion. The advance was almost twice as big as the highest forecast of 31 surveyed economists.
Increasing borrowing usually signals that a drop in unemployment is giving households the courage to take advantage of holiday discounts, buy cars and finance higher education. At the same time, dependence on credit means the job market has yet to improve enough to provide the incomes needed to sustain consumer purchases, which account for about 70% of the economy. The thawing in employment comes as other reports indicate firings have eased, highlighting an improvement in the labor market that is contributing to a rebound in consumer confidence and spending. Meanwhile, the stock market hit a five month high yesterday, and apparently, Europe’s problems are momentarily forgotten.
While this is good news, most of us are looking for sustained positive news before investing and hiring. We are noticing that some of our clients are expanding which is very good news indeed. Stay tuned!