Pasadena Star News
By: Cynthia Kurtz
Published: 12/31/2014
Time to
wave good-by to 2014 and start planning for 2015. Reliable crystal balls are
hard to come by these days. But even so there are some indications of what to
expect in the New Year.
Let’s
start with the stock market. While it isn’t the most important indicator of the
economy’s direction, higher stock prices can indicate strong earnings estimates
for companies. Strong corporate profits correlate with a rise in GDP and job
growth. 2014 is ending with a record high stock market and predictions that the
trend will continue.
Consumer
confidence - the 800 lb. gorilla in the economy - is up. When consumers are
concerned about spending money there is a chain reaction that reverberates
throughout the economy. Retail sales slump, manufacturing activity slows,
hiring stops, and the unemployment rate increases.
Lower
gasoline prices are leaving extra cash in consumers’ pockets and they seem willing
and ready to spend it. Predictions are that gas prices may go even lower before
stabilizing. Many workers are expecting wage increases in 2015 so confidence
and spending should continue.
Unfortunately
drought conditions are also expected to continue. Even with a few early winter
storms, the levels of the state’s reservoirs and groundwater tables remain
alarmingly low. A wet winter might prevent a crisis but water is going to
remain scarce and the cost for it will go up. Making capital investments and
operating changes now to conserve water will pay off for businesses and
consumers in the long run.
Closely
related to water costs are energy costs. With less water, in-state hydro power
generation slowed to a trickle this summer. Electric utilities had to purchase
power from sources further away and bring it long distances to meet consumer
demands. That costs money.
The 2014
summer fires and the closing of the San Onofre Nuclear Generating Station
(SONGS) increased transmission costs. Power rate increases lag behind commodity
cost increases so residents and businesses alike should expect higher rates in
2015.
Economists
are predicting the price of housing will also rise in 2015 but that 30-year mortgage
rates will remain low. The housing market has not been able to stabilize as it
climbs slowly out of the 2008 crash.
The wild
card for the recovery of the housing market is the Millennials. The U.S. Census
reported that 23 year-olds are now the largest population group followed by 24
year-olds and in third place 22 year-olds. The Census Bureau also says that
rather than becoming smaller, as one might assume, immigrants tend to be
younger so the size of U.S. age groups increase until about the age of 40. That
means there will be even more young adults in their mid-20’s in the next few
years.
When the
majority of Millennials begin to set up their own households, demand for
housing will increase dramatically. With
increased demand, developers will step up production. Manufacturing of furnishings, appliances and
other household goods will also increase.
2015 just might be the year that this trend begins.
Overall
the U.S. economic recovery will continue with bumps in the road when
international incidents send financial shocks through global markets. But at home we can expect relative economic
calm. The SGV will continue to benefit
from this recovery.
Regardless
of how well the economy does, my wish for 2015 is health and happiness for you.
