Ed’s Class D Economic Forecast

The Great Recession’ (generated by the 2007/2008 financial collapse) officially ended in the summer of 2009. That was good. Since then, ‘the media’ has continued to report that ‘The Recovery’ (from the collapse) is also materializing. That’s good too. So why are you still holding on for your business life? You are because ‘The Recovery’ never did arrive. A better yet still optimistic reading is the economy has not gotten any worse.

I define our recovery as a return to our sales levels prior to October 2005. That was the month the Good Guys closed 71 stores. In addition, July of 2005 was the peak of home sales in the United States. Family home sales were a primary source of our audio and video sales.

Here are the facts. Third quarter 2014 GDP was up 5%. Second quarter GDP was adjusted to +3.9%. That sounds great. But much of the improvement came from Federal spending and rising health care expenditures (Obama Care). Overall, 2014 GDP will end up at about +2.0% to +2.5%. 2015 GDP predictions, per the Wall Street Journal, are between +2.5% and +3%. That’s OK. But this trend will not approach my definition of a real recovery any time soon.

In addition, 2014 existing home sales fell 11.54% nationally. Home prices did rise 4.6%. And that’s good for those who sold them. But with a stagnant wage growth of 2.1%, who will buy them from this point forward. Median income is below 1995 levels. Labor participation is at a 36 year low. U-6 unemployment (includes those who are ‘marginally attached’ to the labor force, plus part timers who seek full-employment) is at 11.4%.

Then there’s this. Commodity prices (oil, coal, iron, steel, copper, food stuffs) are declining. Initially that sounds great as you fill your gas tank. But falling world wide commodity prices are typically associated with slowing economic growth. Can you say recession? That is why the predicted 2015 GDP of +2.5% to +3% must been seen as a best case scenario.

Based on the facts, middle class families will not buy homes in a number that will lead to our recovery. They simply don’t have the funds. If families can’t buy homes they won’t fill them with appliances, furniture, and other goods that include our audio and video systems. We can safely conclude that our economic recovery will be postponed yet again in 2015. Frankly it may get worse before it gets better.

Much as a typical Class D amplifier, the economy will continue to deliver a hard harsh result. As the weather, you cannot control or hide from it. You can only prepare for it. So grab your economic umbrella. And plan for a ‘Class D’ economy in 2015.

Visit my main website at  edsavhandbook.com

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