For the first time in years, everyone seems to agree that the economy truly appears to be back on track, as most of this week's new economic indicators zoomed past expectations. Earlier this morning, durable goods orders (an important of measure of how the manufacturing sector is doing) came in with impressive figures, while personal income and savings rates all blew past economists' expectations, and consumer spending is up, too. Yesterday, it was GDP, which beat even the highest predictions and was the best number seen in years.
That's not all. Other manufacturing surveys show huge gains. Home sales are up, foreclosures are down, and more construction is on the way. FedEx and UPS are both setting holiday shipping records. All this despite the expected slowdown from Hurricane Sandy. Even the international news is good. Japan's stock market is way up, Greece got its bailout, and the European debt crisis is (for now) under control. The recession is over, and the people are actually starting to notice:
Also big beat on income and spending. Economy is humming.— Joseph Weisenthal (@TheStalwart) December 21, 2012
The economy is on fire— Also sprach Analyst (@theanalyst_hk) December 21, 2012
Recent strength of economy shows how sad it would be if Washington decided to kill the momentum.— Zachary A. Goldfarb (@Goldfarb) December 21, 2012
That's what makes the ongoing fiscal cliff fight so frustrating. Already markets were down after the House Republicans' failure to pass Speaker John Boehner's Plan B last night, and if no deal is made on taxes or the sequester, odds are that the economy will come to a grinding halt in January. (The current growth is even more remarkable when you consider that many people are expecting that scenario to happen.) If a deal is stuck, no matter what form it takes, some people are seeing their taxes go up and at least some government programs meant to provide stimulus will die. Even if you believe in the (dubious) long-term benefits of austerity, the economy will almost certainly take a hit at the beginning of 2013, economists say.
There's also one major data point that sadly refuses to budge: unemployment. Claims were still up this week, even as companies and consumers are spending more money. Maybe a solution on taxes would get people hiring again, but all the positive economic gains have just not created as many jobs as had been hoped. However, if things keep improving at this rate, 2013 could be a different story. If the government can manage to stay out of its own way.