Today at TILE… Signs of Life?

January 31st, 2011

Today at TILE we talked about possible signs of life in the economy. Is it time to be optimistic? Have you been hearing people around you talk about money with a sigh of relief rather than a grunt of disgust? Mixed messages are always around us, but the earnings reports and other economic numbers that came out in the last few weeks have shown some signs of life worth talking about.

So what are we seeing? Let’s take a closer look:

Are banks lending more? Banks are digging their way out of the credit mess by reversing reserves (which means they don’t expect to lose as much money in the future as they have in the recent past), and some (okay, maybe one or two) are even beginning to lend again. One example of a significant bank-fueled boost to the economy is the $10 billion in credit that JP Morgan Chase provided to small businesses in the past year.

Are we spending more? After hiding our credit cards for two years, we consumers finally seem to want to spend again. Since consumer spending accounts for two-thirds of our economy, what we do with our wallets matters. And it seems like what we want to do is go shopping and grab dinner out!

American Express cardholders spent 15% more on their cards during 2010 than in 2009. During the recent holiday season, retail sales had their biggest percentage gain in six years. Tech companies are profiting from our thirst for gadgets (ahem, Apple and Intel).  Restaurants and the food service industry were the biggest contributors to job growth in 2010. Chain restaurants are seeing sales increase for the first time in two years, and McDonald’s sold 4% more McFood in the U.S. than it did at this time last year.

The market clearly likes these numbers… The Dow Jones Industrial Average (DJIA), which is an index of the 30 biggest industrial companies, is up around 12,000. This is just a number, but it’s the highest we’ve seen since June 2008 – just before the financial crisis hit. Of course, when the market is happy, so are investors! They’re flocking back – Charles Schwab reported a 27% increase ($50 billion) in net new assets during 2010, while Morgan Stanley took in nearly $23 billion. Nearly half of that came in the last quarter alone.

What does this mean for the TILE community? First, do any of these numbers make sense to you? Are you spending more money? Are you hitting Mickey D’s (or Shake Shack ) more often? Are there more recruiters hanging around your campus? Do you think this year will be better than last year for investing?

Good news is always refreshing to hear, but remember there are two sides to every story. For example, unemployment is still high, housing prices are still stuck in reverse, and people in D.C. still haven’t quite figured out how to share their toys. An economic recovery is like walking a tightrope… it’s scary at times, so don’t look down. But it helps when there are signs that things are looking up!

- Amy

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