CHICAGO--(BUSINESS WIRE)--In the February issue of Themes on the Economy®, Diane Swonk lists the positive factors building into a modest tailwind for the U.S. economy. Companies have cash on hand; banks are starting to lend; capital goods orders are showing strength; and, we have reached tipping points for two key sectors: housing and autos.
Building margins “have widened, so as long as builders focus on smaller homes (1,800 square feet instead of the previous 4,000 square feet McMansions), houses are selling. The related demand for construction materials is rebounding too, while plants that service the housing industry are ramping up across the country.”
Swonk says that the turnaround in housing, combined with pent-up demand for new vehicles, is even boosting growth prospects in a city that has been largely written off: Motor City. “Detroit is attracting new tenants in response to cheap rents and an abundance of engineers, college graduates and skilled workers. Home construction is on the rise in response to tight inventories (many of the foreclosures have already been sold or torn down) ...”
There is an “if” attached to the rosier scenario: “Missteps by Washington could easily derail that momentum… A full sequestration, including more than $100 billion in across-the-board spending cuts, would shave roughly 0.75% from real GDP growth this year. That would eliminate any major improvement in labor markets and could cause a setback in unemployment.” To learn more, read this month’s issue of Themes on the Economy®. Archived issues can be found at mesirowfinancial.com.
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