Turning to Page 19, on the US, this is an important Page because Economic Cycle Research Institute, it accurately forecasts the business slowdowns in the United States in 2010, 2011, and 2012. It did not forecast one in 2013 or 2014 but now it is headed down. So this would indicate that we are in for some economic trouble. So far, we haven’t seen it yet but this is a leading indicator and it says we should watch out for it. If it turns out to be right, then we should have a softening of economic activity sometime in the middle of the year. I think that will be a temporary condition. I think the year will come in at 3% or better but this is a warning signal that we’ve got some tougher days ahead.
The real problem in the United States is Median Family Income. Page 20 shows that the Median Family Income today, real, these are real figures, not nominal, but real Median Family Income is lower than it was in 2007. So most of you on the line are probably in better shape than you were in 2007 because you have holdings in the stock market and because you have a house well-above the median price. So expensive houses and stockholdings have appreciated and that has really helped the Top 20% of the income stream. But the middle 60% have struggled all their own and the Bottom 20 (%) have actually lost ground.
Now that situation is improving. If you look at (Page) 21, wages are moving up. I think now wages are going to be rising at about 2.5% rate this year and that is going to be an important positive. That is on (Page) 21. On (Page) 22, we didn’t get the help this year that I thought we might get in Housing. Housing is definitely off the bottom but it hasn’t surged yet. With lower unemployment, higher wages and improving in the employment of 16-34-year-olds, I think there are going to be more family formations so I am looking to housing to be one of the favorable aspects of the economy in 2015.
Housing Starts are not contributing yet but I think that is going to turn around as shown on Page 23. House prices are still appreciating. They are not appreciating — as you see on Page 24 — they are not appreciating at 10% or better anymore but they are still appreciating at 5% and there is nothing that gets you to buy a house faster than knowing that it is going to be more expensive if you wait six months.
As I said, I also think Capital Goods is going to be a positive. Page 25 shows Capital Goods in a clear positive uptrend. Up until now, most of the capital goods spending has been for Labor-Saving Equipment, that has allowed the goods and services to get out the door with fewer workers. I think that is going to change. I think there is going to be more capital spending by small businesses. Optimism is improving. So I think that is going to be the second favorable thrust for the US economy in 2015.
Page 26 shows that we are now exporting more oil than we ever before. We have relaxed the requirements on US exports and that has helped our trade deficit as has the decline of the price of oil as shown on Page 26. And we should all celebrate the fact that now, the United States is the largest producer of crude oil in the world, more than Saudi Arabia and that is shown on Page 27. Russia is third and then comes China, Canada, etc. So we are producing oil at a healthy rate but we are still importing.
