Economic Evaluation

Alex O’Hanley, Anika Ferdoash, Oli Wragg, Remy Mayaud, Shiva Rajpal

Are we still in a recession? ● The U.S. economy is no longer officially in a recession as the economy has been growing slowly yet steadily

● In the 12 months through the end of January 2016, prices increased by 1.7%

● GDP in 4th quarter of 2015 increased by a 1.4% annual rate, which was greater than estimated and was upwardly revised, reflecting an increase in consumer spending

● In December of 2015, consumer spending increased by 2.35% year-over-year

● Growth slowed in the 4th quarter of 2015 but the economy grew by 2.4% for the whole of 2015

● The economy is just OK- it is experiencing mild growth, a relatively stable labor market, modestly increasing wages and stabilizing inflation

● Domestic economy is not totally out of the woods as corporate profits declined by 5.1% in 2015, the largest decline since the 2008 recession

● Declining corporate profits, weak business investment and a deceleration in international trade are all weights on the economy which reflect the impact of a dwindling global economy on the domestic economy

Increase in Consumer Spending

•In December 2015, in 15 major U.S. metro areas, young and lower income consumers enabled a 2.35% increase in consumer spending

•Spending in the group of under 35: 1.9 percentage points of the total growth in spending

•Bottom 20% of income spectrum: 1.25 percentage points of total growth in consumption

• Upper 20%: 0.43 drag on total consumption growth

•In Dec, bottom quintile responsible for 13.8% of total spending, 10% increase from last year

•Consumers under 25 accounted for 6.9% of total spending, 16% increase from last year

•Reasons include the rise in prices for essentials such as medical care and car repairs and low income consumers were forced to increase spending

Why do you think consumers in the bottom quintile

are spending more than consumers in the top?

Where are we in the economy?

● The United States economy is in a decent shape. ● One of the fastest growing developed economies in the world, as this is one the reasons the Fed was able to

increase the interest rate in December last year, whenever the fed increased the interest rates it shows that the economy is doing well,.

● There are number of factors which have helped the United States economy to get out of the 2008 recession:○ Unemployment rate is really low right now, and thus a number of jobs have been created in the market

■ because of this it has helped the consumers to increase their spending■ thus they have also borrowed more money from the banks■ which has contributed in the growth of the economy.

Where are we in the economy?● Predictions that the slow growth of world market, specially of China and the whole Europe now is putting a lot of

burden on the United states market ○ One of the main reasons that the Fed has decided not to increase the interest rates now to a much bigger

extend as they are scared that the economy may even go back in the recession if they increase the rates in a much faster way.

○ Consumer spending have to go up in a much bigger extant, from the past month the consumer spending have gone down, the

○ other factor which the Fed mentioned is the worry about inflation, the inflation level has been going down to a bigger extent, and the prices are not going up.

○ Strong dollar has cooled out the net exports and there have been week business investments and thus the inventories have been held up, and it has made the United States products more expensive in all around the world.

The Stock Market As of April 6, 2016

● Overall not doing well

● Major losses in Europe and Japan

● DOW dropped 174 points

● S&P 500 dropped 1.3%

● NASDAQ dropped 1.5%

● Dollar dropped 1.2% against the Yen○ Lowest drop since February○ If the Yen strengthens, it will bring

down global interest rates○ Bank of America decreased 23%○ Wells Fargo decreased 14%

What effects the stock market?

● Supply + Demand

● Risk Averse

● Slow growth

● Ripple effect from the last recession

Oil Prices + the Stock Market● No correlation but the move together

○ Falling prices often signal softness in demand that can foretell an economic slowdown.

○ Stock needs to detach from oil prices○ Less volatile oil prices

● Oil Prices increasing○ WTI Crude + Brent Crude increased .5%

to $35.89○ Overproduction concerns decreasing due

to production freeze

U.S. Balance of Trade Analysis● Balance of Trade is the difference between

exports and imports.

● Debit Items: Imports, foreign aid, domestic spending, domestic investment.

● Credit Items: Exports, foreign spending and foreign investments in the domestic economy.

U.S. Balance of Trade Analysis● �US trade gap has narrowed to 40.44 billion as of March 2016 below market expectations

of 41.5 billion

● The United States has been running a consistent trade deficit since 1976

● Average trade deficit narrowed by $1.4 billion – imports falling more than exports suggesting the drag on GDP may be smaller than expected.

Islamic Financing

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