Norman says that a big reason for the continued modest growth rate of the U.S. economy is that bank credit “continues to expand at a healthy pace.”
Noting that private credit at commercial banks is up by $300 billion from 2011, Norman says that U.S. households seeking loans and credit are increasingly willing to take on debt and spend money, a good sign for the economy.
“Obviously that is key to supporting demand as government spending pulls back, which would otherwise be a very strong negative,” he adds.
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Norman also notes that gas prices are “moderating”, interest rates remain low, and mortgage refinancings are gaining steam. That’s all good news for the financial markets, as well.
“Given all these data we continue to believe that the current market swoon is indicative of a temporary soft patch,” Norman says. “Growth will remain in the 2.0% to 2.5% range for the remainder of the year and that is not an environment that is negative for stocks. Indeed, given continued low labor costs, low inflation and low interest rates, the environment for stocks remains quite positive.”
U.S. consumers have grown accustomed to taking what the Federal Reserve and leading economists have to say in stride, if not with a grain of salt. But the people who are paid to track the economy say that things are better than the public believes.
Let’s hope the next few months bear that sentiment out.