Economic Commentary

The New Year Is Off and Running

After a slow start to the year, we are off and running. Corporations are reporting earnings which are mostly positive as expected and economic data is being released. The data continues to be positive showing that the economy continues to grow, but not at a torrid pace. Inflation also remains subdued and while many are concerned with the long-term inflation threat, a slow recovery also points to less of a threat of inflation. The stock market remains positive which means that the markets are optimistic regarding economic recovery, however, many analysts believe that the present bull market is due for a pause. As we mentioned last week, optimism about the state of the economy is also being factored into a higher price of oil and other commodities which could in turn threaten the recovery by increasing the threat of inflation and slowing down economic growth.

So where do we go from here? This present pace of economic growth, while positive, is not enough to help us overcome two major obstacles to prosperity. One is the real estate slump and the other is high unemployment. We are approaching the release of two major indicators that will help determine if the economy is continuing the pace of improvement. One is the first reading of the economic growth for the final quarter of 2010. The other is the employment data for January, which represents the first measurement of economic data within 2011. Anything less than meeting the strength of the previous month and quarter of data would be considered disappointing. Actually, improvement is what we should be hoping for.

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