After rocketing to fresh highs, U.S. stocks SPX +1.42 percent sank dramatically. Americans are asking how much longer a nine-year-economic expansion can last. The Federal Reserve will be raising interest rates and when that happens, the economy slows.
It may not slow immediately, interest rates are still low enough that it will most likely be awhile before they hinder growth. Additionally, wages are on the rise, job openings are at a record high, and the unemployment rate has fallen to 3.7 percent, a 47-year low.
According to Market Watch, Americans have more than enough money to spend and they are confident in the economy. They tested this theory by looking into how much money the nation was spending on restaurants.
Americans Are Eating Out and Ordering In
Senior economist Jennifer Lee, at BMO Capital Markets, noted that restaurants are wants, not needs. People tend to dine out when the economy is thriving, and they are not worried about losing their jobs.
By that standard, the economy is doing great, according to Market Watch.
Since spring 2018, spending at restaurants and bars have soared to the highest annual pace in 25 years. Sales of food and drinks purchased outside the home rose to 10.1 percent from August 2017 to August 2018.
The most current figures on restaurant sales will be released on Monday, Oct. 15, 2018. It is expected that the overall retail sales will increase near 1 percent. There was hardly any gain in August.
It would not be surprising if spending at restaurants tapered off in September due to the recent streak of large gains. However, it is clear that spending is up, and the economy is strong.
Currently retail sales are the focus, but other reports will confirm that even though Wall Street has lost a step, the economy is still buzzing. This includes job openings, industrial production, and the level of inventories.
After the Dow Dropped Should Americans Be Concerned?
Larry Kudlow, White House chief economic adviser, was asked in an interview why the stock markets took such a hard hit, and does he see them going up or down over the course of 2019.
Kudlow said these kind of corrections are normal. The Dow fell by 4 percent and he thinks the average is 6 percent. Therefore, the economy is in great shape. He said the nation is in an “economic boom.”
They are absolutely crushing it, profits are rising, confidence is up, blue-collar’s are up, wages are out.
Regardless, there are analysts that see warning signs. Interest rates and energy prices are rising. The trade war with China is stunting growth, and the global economy is slowing. Additionally, the International Monetary Fund revised its protection for U.S. growth down to 2.5 percent for 2019.
Kudlow, however, does not see any cause for concern. He believes an economic boom has been created. The president has changed his policies, the entire incentive structure and the economy has responded to the lower tax rates for individuals and small businesses. The administration has deregulated across the board. The “tremendous boom” in energy is expected to continue for some time, according to Kudlow.
He made a point on wages: Not only are they rising but blue-collar, middle, and service areas wages are rising faster than white collar workers. This is unusual as they usually rise slower than white collar wages.
Kudlow believes the new face of the Trump economy are the men and women who own their own small businesses. He said that Trump has “entered the war on energy and ended the war on success.”
The president has stated that raising interest rates is not necessary and he knows better than the Federal Reserve. Currently, interest rates are 2.25 percent.
Traditionally, the Federal Reserve raises interest rates when the economy is strong so there is not a spike in inflation. Additionally, former presidents have allowed the Federal Reserve to act independently.
Kudlow responded that Trump is a successful businessman and investor who has a significant amount of knowledge concerning these topics and was only giving his opinion. The president is concerned that the Federal Reserve may react too quickly and choke the economic recovery.
By Jeanette Smith
MarketWatch: Forget the Wall Street carnage. To read the economy, look at how much Americans are eating out
Fox News: Larry Kudlow on stocks, the Fed and state of US economy
Image Courtesy of stevepb’s Pixabay Page – Creative Commons License