The economic outlook in America remains stable, but largely unchanged, for the second half of 2013.

They say “hindsight is much more accurate than foresight” and it may be true. There are many questions that remain unanswered about the future of our economy. We don’t know if the federal debt ceiling will be maintained or raised. If the debt is held to the present level, our government may have to put another sequester in place in order to continue to operate at the end of this year.

The budget sequester is a set of automatic spending cuts that were authorized by the Budget Control Act of 2011, which took effect in March of this year. Similar cuts are expected to take place for the next eight years. The effect of a sequester action is to automatically cut spending in various federal programs, because Republicans and Democrats in Congress could not agree on what to cut, or even how much to cut.

One thing many on both sides of the aisle agree on is that some tax reforms are necessary. These will probably not take place this year, but will be put on the agenda after the 2014 mid-term elections. That is because many members of Congress want to get re-elected first, before they have to make difficult decisions about taxes.

So what does the immediate future hold for the economy? The good news is that consumer confidence in the economy is increasing current retail sales and the housing market. These markets are showing growth, which indicates that we have an improving economy.

Retail sales have continued to increase, from about .5 percent this past May, to an expected increase of around 1 percent in June. While this is small, it is positive. Retail stores may get another boost as stores gear up for back-to-school sales, starting in August, when parents will be buying goods for their children. 

Un-employment is dropping, too. It was reported as 7.6 percent about two weeks ago. It is anticipated that weekly jobless claims will drop from 360,000 to 340,000 this week, which is a good sign that jobs and the economy are improving. That means that the 195,000 new workers hired recently, combined with annual pay raises that are anticipated for employees already on the job, could prime the economy’s pump.

New housing starts appear to have increased almost 5 percent in June, which should jumpstart the housing market, since available new housing inventories are at a low. The housing market is still not back to where it was before the recession, and it will take a while to fully recover. Overall, the economy looks like it can make a slow comeback on a positive note due to this new housing construction.

The reason that housing will improve is that population is still growing across the nation, even if it has flattened in northern New England. But even here in Maine, there is pent up demand, from young people still living with their parents, who will seek their own homes, as they get jobs and things improve.

Housing sales to young families that are first-time homebuyers has a domino effect on the economy. It creates jobs in the marketplace. It helps suppliers produce housing components and materials for contractors and remodelers, who in turn, build jobs and grow the economy. That cycle starts money flowing into machinery, equipment, new commercial or industrial buildings, and urban and rural infrastructure. These investments result in jobs.

There is also a combination of good and bad news for the stock market. The good news is that stocks have reached new highs. The bad news is that people fear another stock crash, since the stock market has been very erratic, with frequent, large up and down movements.

Financial analysts were concerned about just how the monetary policy of the Federal Reserve will be addressed, when it testifies before the House Financial Services Committee on July 17 and the Senate Banking Committee on July 18.

The outcome is uncertain. The Federal Reserve Board could let interest rates rise, by phasing out its purchasing of treasury bonds, toward the end of the year. That could cause bond owners to suffer considerable income losses. Whatever decision is made could change the direction of the economy in ways that affect people’s savings and personal investments.

We have been through tough economic times, and although the improvements are still small, the outlook for the longer term is definitely upbeat.

— Bernard Featherman is a business columnist for the Journal Tribune and former president of the Biddeford-Saco Chamber of Commerce.



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