Market and economic update: U.S. economy has yet to reach the peak of this economic cycle

Data last week indicated the U.S. economy points to continuing expansion. Even though the recovery has reached its fifth year, economic data seem to indicate the U.S. economy has yet to reach the peak of this economic cycle. Consumer confidence remains positive, but not elated; income growth remains quite modest; and while job growth has been improving, slack remains.

This week’s payroll report may indicate further expansion in nonfarm payrolls, but little to no improvement in the unemployment rate. Housing activity continues to recover, although total activity remains well below levels seen prior to the financial crisis. Industrial activity seems to be improving with the July durable goods orders report increasing 22.6%, due to a record 324 orders for Boeing. Excluding transportation, orders declined 0.8% for the month.

The recovery in the eurozone seems to have slowed, with unemployment remaining high (11.5% in July) and inflation easing (up just 0.3% year over year in August). The European Central Bank (ECB) has done little to stimulate the economy, and governments have yet to shift to growth policies. Further expansion of ECB monetary policy is unlikely to be implemented until 2015. European growth will likely slow into 2015, until we see some stimulus response from government or further action from the ECB.

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Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank. 

This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. The organizations mentioned in this publication are not affiliates or associated with U.S. Bank in any way.

Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for investment.

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