Second, retail sales have also strongly rebounded and continue to forge ahead.
We are back to April 2007 and September 2008 levels.
Third, despite a high unemployment rate, individuals have largely repaired their
balance sheet to levels not seen since 2000 and the 1985-1990 period. I am convinced
that the debt service payment/disposable personal income ratio will shrink further
however that will weigh on GDP growth but make the economy much sounder longer
term. In the meantime, the savings rate has stabilized in the 6% area.
Finally, we also analyzed US federal tax receipts from the 2006 tax year (ending in
September) which present an online view of the real state of the US economy, since data
are provided each week. The graph below plots monthly taxes received from individuals,
corporations, excise and all contributors.
Data clearly point towards an improving economy since February-April 2009;
this corresponds to the through of equity markets in the Western world in March 2009.
The dramatic improvement in corporation taxes paid (+20% for the 2010 tax year) show
that the economy definitely turned around whilst taxes paid by individual are still sluggish
but have gained traction for a year now.
Excise taxes are as close as we can get for the exact picture of the economy: they improved
a lot late last year and are now in a consolidation phase but nowhere near a double dip. It
is worth noting the correlation between tipping point of the excise tax collection
amelioration with the stock market trough in March 2009 and the
sluggishness of 2010.
All the above lead me to think me that equity markets should at worse do alright at
least to the end of the year.
US Treasury: Financial Management Service
Federal Reserve Bank of St. Louis: Economic Research