The Truth About the Economy in 2015 That You Need to Know Now

Economic growth is calculated based on a series of data points, yet the ones that really matter are the ones that directly impact your life. Statistically, 2015 was a stable year. On paper most numbers remained the same or had small increases. This has the ability to increase consumer confidence and grow the economy faster.

Oil Prices made the headlines throughout the year, mostly in the form of lower gas prices. Consumers celebrated with reduced costs of transportation, leaving them with higher amounts of disposable income. Yet spending was slow to rise because consumers were setting aside money in savings instead of increasing their spending. Savings rates rose from 4.2% to 5.5% year over year. Economists are quick to point out that this reflects a lack of consumer confidence rather than a recognition that saving for the future is vital to personal long term success.

On the flip side, oil stock prices plummeted and layoffs in the industry are high, as oil investments decline. Traditionally falling oil prices has a positive effect on the economy. This time around it is having near zero effect according to Goldman Sachs economists¹. With more oil created domestically, there is less reliance on foreign oil, but that also translates to a greater economic impact as prices fluctuate.

Real Estate is another index that saw positive gains in 2015. Home prices rose an average of 4.1% across the country, from the previous year². New home construction was on the rise and mortgage rates remained low, enabling borrowers to get more house for their money. As home listings could not keep up with demand, increases were seen in most major cities. While the Federal Reserve raised rates by 0.25% in December, long term mortgage rates remain affordable.

The stock market was flat for the year, leaving those fighting for retirement gains worried about the overall market. Increasing globalization means US markets are more directly impacted by national events such as China’s economic downturn and Europe’s high unemployment rates.

Credit Defaults stabilized in December 2015 at 0.97%. This is good news for both the creditors and the consumers who are holding the debt. First mortgage defaults increased by 2 points in December and rose to 0.84%, while credit card defaults fell 42 points to 2.49%³. These numbers indicate that a smaller percentage of consumers are struggling to keep up with debt payments from credit cards.

Overall Economic Growth through the first three quarters of 2015 rang in at only 2.2%. Unemployment rates fell to 5% and inflation remained low. Economists do not agree if we will continue to see these numbers strengthen or if we will have another downturn.

The big picture should give you confidence that the economy has stabilized, and encourage you to reign in spending for a stronger financial outlook. So often an improving economy leads to confidence and overspending, which then cycles back around to recession like circumstances.

A personal recession has a much stronger impact on your outlook, than what the economy is doing as a whole. This data covers the same principle points you should consider when deciding your personal economic outlook.  Where is your personal consumer spending, real estate outlook, retirement investments, and credit defaults?

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