Economically speaking, 2013 looks to be an unspectacular year, but that isn’t all bad

At one time, 2013 was predicted to be a year of strong economic growth.   It doesn’t look that way now, but it doesn’t look dismal either.  Various reports and trends seem to be mixed.   It seems that we escaped the “fiscal cliff recession”, but there does not seem to be any clear set of trends that point to anything but a rather ho-hum year economically.  Here are some good news and bad news items, how they add up is anyone’s guess.

Good news items:

  • The US has a vast resource of untapped low cost energy, if efforts continue to exploit these resources, not only will we see energy costs go down, but energy could generate significant economic activity as some energy intensive industries relocate to the US.
  • Housing continues to improve, slow and steady may be the watch words, but after the last 5 years, slow and steady sounds pretty good.
  • China is undergoing a significant infrastructure expansion.   The spending from these projects should help the world economy as china will be importing a significant amount of technology and resources to fund this.
  • The German economy is looking much healthier and the UK looks to grow after years of contraction.    This may not result in great growth for all of Europe, but fears of an economic collapse in Europe seem to be a faded, distant murmur.
  • The price of gasoline is predicted to continue going down.   Granted the current prices are nowhere near the $1.90 per gallon average of 4 years ago, however,  reduced gas prices usually translate to increasing spending in other areas.

Some not so good news items:

  • The latest outlook by the International Monetary Fund predicts that US growth will slow slightly from its 2012 rate of 2.3%.   We can expect growth to be closer to 2%.
  • The short term and long term US debt issues can present a significant challenge to US future growth.   It remains to be seen if Washington can address these issues in a sustainable fashion or remain largely dysfunctional.
  • Unemployment seems to be stuck at 7.8 %, job growth while improving still does not look strong enough to bring unemployment back to pre- recession levels.
  • Indications are that taxes will increase both at the federal and local level in 2013.  We are particularly concerned about sales tax rates.

In general, it appears that 2013 won’t be a “bad” year, but growth will be slower than hoped.   However, things look better now than they did when we just entered 2012.