Review of the Economic Situation and Prospect Essay

Review of the Economic Situation and Prospect, 468 words essay example

Essay Topic: situation, review, economic

If you take a look at the graphs above, you can notice that personal income increased $42.5 billion, or 0.3%, disposable personal income (DPI) increased $37.8 billion, or 0.3%, in December. Furthermore, personal consumption expenditures (PCE) decreased $0.7 billion, or less than 0.1%. At the end of 2015, the PCE Price Index percent change from one year ago hit an all year high registering a 0.6%. This 0.6% increase in the PCE Price Index percent change from month one year ago was the largest since December of 2014 (0.8%).
The Personal Saving of $753.5 billion was the largest level since December of 2012 ($1,425.7 billion), which also resulted in a saving rate of 5.5% that was also the since December of 2012 (11.0%). Personal income increased 4.5% in 2015 compared with an increase of 4.4% in 2014. Over the past six months, spending was soft and almost unchanged until the last three months of 2015 is when we see some movement on the PCE charts. This is mainly driven by the holiday gifts, and vehicles spendings. Additionally, PCE inflation is affected by low gas prices.
According to Trading Economics' Forecasts (http//www.tradingeconomics.com/) the PCE Price Index is expected to be 110.89 Index Points by the end of this quarter. Furthermore, they estimate PCE Price Index to stand at 109.38 in 12 months time.
Additionally, Philadelphia Federal Reserve Bank surveyed about 40 private sector forecasters on their outlook for 2016. The survey's results suggest that 2016 might not be a great year for the overall personal income due their forecasts that inflation will down to a 1.5% average annual rate for the Consumer Price Index, as well as 1.3% for PCE.
Although personal income growth has remained positive since 2013 it definitely slowed down the pace on its growth. Income somewhat increased mostly towards the end of this past year in August personal income grew by 0.3%.
Based on the market research I have done, I think that Personal Consumption Expenditures will decrease in 2016 throughout the year, and that by the end of the year it'll either close lower or maintain the PCE as 2015. How much cash consumers spend can certainly be reinforced by wage increases, but it can also be affected negatively by market volatility and pessimistic consumer sentiment. There is also the questions surrounding China's economy, and how that's going to affect the global and US market on several fronts. While there might be an argument that the jump in savings to a three-year high in December may suggest consumption could rebound in the months ahead, I just don't see it in the very near future.
Although, I do think that higher savings and rising house prices might help to drive spending later in 2016.
The personal income might be affected by several things like the dollar, which seems to be doing better, and hopefully that continues to be the case. Additionally, the CPE Index is considered a volatile measure as it includes seasonal food and energy prices.

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