Today is Halloween, which often serves as a sort of barometer for how the all-important holiday spending season will play out over the next two months. And if form holds, we could be in for a terrific holiday. According to the National Retail Federation, the average American plans to spend $72.31 on Halloween decorations, candy and costumes this year, which is up more than 9 percent from last year and is the highest figure in the nine-year history of the survey. All told, spending on Halloween is expected to reach $6.86 billion this year.
Interestingly enough, Americans will spend more money on adult costumes this year - $1.21 billion - than on children's costumes - $1 billion. Those numbers were $990 million and $840 million last year. We'll also spend an additional $310 million this year on costumes for our pets.
And the most popular costume? We can expect to see roughly 2.6 million zombies rising from the dead this year, then roaming the streets of America asking for candy.
Monday, October 31, 2011
Thursday, October 27, 2011
GDP Comes Back Strong
Thursday's report on third-quarter GDP growth was the strongest we've seen in some time. In historic terms, 2.5 percent growth is fairly normal, but in these beleaguered times, it was the most growth we've seen in a year, and nearly doubled the second quarter's 1.3 percent.
The biggest growth trigger was personal consumption expenditures, which grew 2.4 percent in the quarter after growing just 0.7 percent in the second quarter. Sales of computers accounted for 0.21 percentage points of the growth in GDP after adding 0.07 percentage points in the second quarter. Motor vehicles had accounted for a 0.10 percentage-point drop in the second-quarter GDP, but rebounded to add 0.07 percentage points to this quarter's growth.
With this solid quarter, we've turned a significant corner: The overall economy has now surpassed the size it was prior to the recession. Our inflation-adjusted gross domestic product totals roughly $13.35 trillion at this point. The size of the economy had peaked at around $13.33 trillion towards the end of 2007, before contracting in the recession.
The biggest growth trigger was personal consumption expenditures, which grew 2.4 percent in the quarter after growing just 0.7 percent in the second quarter. Sales of computers accounted for 0.21 percentage points of the growth in GDP after adding 0.07 percentage points in the second quarter. Motor vehicles had accounted for a 0.10 percentage-point drop in the second-quarter GDP, but rebounded to add 0.07 percentage points to this quarter's growth.
With this solid quarter, we've turned a significant corner: The overall economy has now surpassed the size it was prior to the recession. Our inflation-adjusted gross domestic product totals roughly $13.35 trillion at this point. The size of the economy had peaked at around $13.33 trillion towards the end of 2007, before contracting in the recession.
Venture Capital Roars Back
Much ink has been spilled over the exceptionally poor performance of the stock market during the third quarter of 2011, but there's one area that turned in strong numbers over that period: venture capital. U.S. venture capital firms poured a total of $8.4 billion into 765 start-ups during the third quarter. The dollar figure represents an increase of 29 percent over the third quarter of 2010.
The biggest winner was the consumer information services category, which includes such things as online search firms and social media. Those businesses received more than a billion dollars from venture capital firms in the quarter, in a total of 103 different deals. That's more than double the dollar figure raised in the same quarter last year.
According to Dow Jones VentureSource, which compiled the numbers, venture-capital activity is now on a pace to return to pre-recession levels by the end of the year. That could be a big jump-start for this sluggish economy.
The biggest winner was the consumer information services category, which includes such things as online search firms and social media. Those businesses received more than a billion dollars from venture capital firms in the quarter, in a total of 103 different deals. That's more than double the dollar figure raised in the same quarter last year.
According to Dow Jones VentureSource, which compiled the numbers, venture-capital activity is now on a pace to return to pre-recession levels by the end of the year. That could be a big jump-start for this sluggish economy.
Wednesday, October 26, 2011
Consumer Confidence: A Double-Barreled Drop
It's not just retirement confidence that's dropping; consumer confidence is also falling, now reaching its lowest levels since we were in the midst of the recession. The most widely watched confidence reading, conducted by the Conference Board, has two basic measures, a current index and a future index, and usually the overall measure declines when one or the other drops. But in the October reading, people have gotten more pessimistic about both the present and the future.
The percentage of people who expect business conditions to be better in six months declined, as did the percentage of people who expect their income to decrease over the next six months. On the other side of the coin, the number of people saying that business conditions are bad right now increased in October, as did the number of people saying that jobs are "not so plentiful."
While these consumer confidence numbers provide a lot of insight into where consumer spending might be headed, it's important to realize that the people surveyed are random Americans, who don't have any special insight into the economy. For instance, the same survey found that inflation expectations over the next 12 months are at 5.8 percent. While anything is possible in this economy, the annual inflation rate hasn't actually been that high since 1982.
The percentage of people who expect business conditions to be better in six months declined, as did the percentage of people who expect their income to decrease over the next six months. On the other side of the coin, the number of people saying that business conditions are bad right now increased in October, as did the number of people saying that jobs are "not so plentiful."
While these consumer confidence numbers provide a lot of insight into where consumer spending might be headed, it's important to realize that the people surveyed are random Americans, who don't have any special insight into the economy. For instance, the same survey found that inflation expectations over the next 12 months are at 5.8 percent. While anything is possible in this economy, the annual inflation rate hasn't actually been that high since 1982.
Tuesday, October 25, 2011
The Drop in Retirement Confidence
Americans' confidence in their ability to retire comfortably has been declining lately, according to the annual retirement survey conducted by SunLife Financial. That's no surprise, given the economic environment we've been living in the past few years. What is surprising, though, is the timing. While the confidence level stayed relatively stable from 2008 to 2010, it dropped suddenly by 18 percent in 2011.
The thing that's changed is people's confidence in their ability to pay for their basic living expenses in retirement. In December 2008, after the recession had already been in effect for a year, 46 percent of Americans said they were very confident they'd be able to pay for their retirement expenses. Only 14 percent said they were "not at all" confident.
Now those numbers have reversed. In the 2011 survey, more respondents - 28 percent - said they were not at all confident about their retirement than those who said they were very confident (23 percent). The biggest issue here may be a lack of confidence in government: Confidence about Social Security has dropped from 22 percent in 2008 to 9 percent now, and confidence about Medicare has dropped from 20 percent to 8 percent.
The thing that's changed is people's confidence in their ability to pay for their basic living expenses in retirement. In December 2008, after the recession had already been in effect for a year, 46 percent of Americans said they were very confident they'd be able to pay for their retirement expenses. Only 14 percent said they were "not at all" confident.
Now those numbers have reversed. In the 2011 survey, more respondents - 28 percent - said they were not at all confident about their retirement than those who said they were very confident (23 percent). The biggest issue here may be a lack of confidence in government: Confidence about Social Security has dropped from 22 percent in 2008 to 9 percent now, and confidence about Medicare has dropped from 20 percent to 8 percent.
Monday, October 24, 2011
Europe's Next Steps
The Greek debt crisis has been festering for more than a year now - when and how is it ever going to end? According to a poll of mutual fund managers conducted by Bank of America Merrill Lynch, the overwhelmingly expected result is a default. Three quarters of the respondents expect it to happen by the first quarter of 2012.
Yet, by and large, they don't expect this event to be too traumatic for the American economy. The majority of respondents did forecast that Europe is likely to be thrown into recession by a Greek default, yet only 25 percent expect that to turn into a global recession. That's down from 40 percent that expected a global recession as recently as September.
So a Greek default may not be as dangerous as it sounds. In one sense, it would be an opportunity to put the immediate problem behind us, and the European governments can get back to focusing on growing their economies rather than pursuing endless bailouts of Greece. In the long term, that might be the best remedy for all.
Yet, by and large, they don't expect this event to be too traumatic for the American economy. The majority of respondents did forecast that Europe is likely to be thrown into recession by a Greek default, yet only 25 percent expect that to turn into a global recession. That's down from 40 percent that expected a global recession as recently as September.
So a Greek default may not be as dangerous as it sounds. In one sense, it would be an opportunity to put the immediate problem behind us, and the European governments can get back to focusing on growing their economies rather than pursuing endless bailouts of Greece. In the long term, that might be the best remedy for all.
Friday, October 21, 2011
IRS Guidelines for 2012
The IRS has issued some announcements on updated regulations for 2012, and there is some good news in there for retirement savings. The limit on 401(k)s has been raised from $16,500 this year to $17,000 next year, so you will be able to put away another $500 tax-free. That applies to 403(b) plans, for people who work for nonprofits, as well.
There are also some cost-of-living adjustments that should provide a small amount of tax relief for high-income taxpayers. The personal exemption will rise from $3,700 to $3,800, and the standard deduction for married couples will go up from $11,600 to $11,900. And the 35 percent top bracket will now apply to incomes of $388,350 and higher, up from $379,150 this year.
There is also some small movement on the estate tax, which his been a moving target for the past few years. The exemption will be raised to $5.12 million next year, up from $5 million. But be warned: At this point, that exemption is scheduled to drop back to $1 million at the end of 2012, unless more legislation is passed.
There are also some cost-of-living adjustments that should provide a small amount of tax relief for high-income taxpayers. The personal exemption will rise from $3,700 to $3,800, and the standard deduction for married couples will go up from $11,600 to $11,900. And the 35 percent top bracket will now apply to incomes of $388,350 and higher, up from $379,150 this year.
There is also some small movement on the estate tax, which his been a moving target for the past few years. The exemption will be raised to $5.12 million next year, up from $5 million. But be warned: At this point, that exemption is scheduled to drop back to $1 million at the end of 2012, unless more legislation is passed.
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