Bank of America Offers Its Two Cents on Conditions Affecting American Economy
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Bank of America, the second largest bank holding company in the United States, and the 23rd largest company in the world in 2015 according to Forbes, knows a few things about doing business. That is why when Bank of America offers a report regarding its opinions about current events affecting the United States’ economy, analysts, politicians, and investors all tend to take heed.
Bank of America, the second largest bank holding company in the United States, and the 23rd largest company in the world in 2015 according to Forbes, knows a few things about doing business. That is why when Bank of America offers a report regarding its opinions about current events affecting the United States’ economy, analysts, politicians, and investors all tend to take heed. The report identifies a list of ten issues the banking giant believes have affected the current US economy, and will likely continue to have an impact in the near future.
1. Drop in Unemployment
According to the report, non-agricultural jobs grew by 223,000, causing unemployment to fall from 5.5 percent to 5.4 percent (the lowest it has been since 2008). Also promising in this category is that labor force participation rose to 62.8 percent and average hourly earnings ticked up slightly by 0.1 percent. The puzzling disconnect between unemployment rates and earnings continued, but overall the report viewed these conditions as having a positive impact on the economy.
2. Debate over Federal Reserve’s Interest Rate Decision
Many continue to argue the merits for and against raising interest rates, a decision the Fed is likely to make in a few months. Most believe an increase is inevitable and desirable to prevent inflation, while others suggest the Fed should keep interest rates at their present level to bolster further economic growth. The debate has led to fluctuations in the market at each hint that the Fed may take action, and many investors are basing their current financial strategies on rumors of an increase later this year.
3. Effect of Trade Deficit on GDP
Burdened by an increase in the value of the dollar, US exporters have seen their demand dwindle in recent months. Thus, March’s trade deficit grew from $35.9 billion in February to $51.4 billion. This, in turn, led to a cut in estimated GDP of 0.6 percent.
4. Factory Orders
March also saw an increase in factory orders (a 2.1 percent growth over February). However, Bank of America warns, a weakness in nondurables inventories could have a negative overall effect on GDP numbers.
5. Dipping Productivity
Another troubling consideration in Bank of America’s report concerned non-agricultural productivity. According to the report, productivity fell 1.9 percent in the first quarter of 2015, but labor costs spiked by a whopping 5 percent.
6. Increases in Home Prices
Home prices continue their slow ascent. However, they are nowhere near the levels seen during the housing bubble; most analysts view the growth in home prices favorably and they appear to be positively influencing the economy and investor confidence.
7. Resilient Services
In another positive note for the economy, the IMS non-manufacturing index climbed from 56.5 in March 2015 to 57.8 in April 2015
8. Easing of Commercial Real Estate Lending Standards
The April 2015 edition of the Senior Loan Officer Opinion Survey (SLOOS) indicated a loosening of commercial real estate lending standards. This typically acts as a positive marker for economic growth, showing that lending institutions have more available cash and greater willingness to incur slightly greater risk as a result.
9. Continuing Low Jobless Claims
Claims of initial joblessness remained remarkably low for the week ending May 2, 2015 (265,000). These numbers have remained low for much of 2015, despite a slowdown in several sectors of the economy due to the increased value of the dollar, dip in oil prices, and prolonged winter cold.
10. Wholesale Inventories Tick Slightly Higher
While not earth shattering, Bank of America did feel it was worth noting a positive movement in wholesale inventories, which increased slightly by 0.1 percent in March.
