Economic Trends from Wells Fargo

I was privileged to hear Dr. Sohn, Chief Economist for Wells Fargo Group this week. He has an excellent economic site at: www.drsohn.com

He made some interesting economic observations and we will summarize some of them:

1. The lowest 20% of income earners in the USA spend 7% of their income on gasoline, while the wealthiest 20% only spend 1.7% of their income on gasoline. Thus, high gasoline prices inordinately penalize the poor.

2. As of September 2004, CEO’s in the outlook index are positive about the future economy.

3. There is 550 BILLION DOLLARS in cash in the hands of corporate America, vs. $250 Billion in 1999.

4. Capital goods spending were $40 Billion in 1993, $55 Billion in 2002, and $65 Billion in 2004.

5. 2004 shows $50 Billion in inventory spending vs. $10 Billion in 2001.

6. GDP growth for 2004 will be 3.8% and 2005 is projected at 3.5%.

7. Fed Funds interest rates: 6% Oct 2000, 1.5% Oct 2002, 1% Oct 2003, 1.5% Oct 2004.

8. The US is still not creating enough jobs monthly to offset or absorb the labor force growth.

9. Core inflation is declining, suggesting lack of consumer demand.

10. 10 Year Tsy Rates go down and oil prices go up for 2 reasons:

a. high price of oil is inflationary

b. uncertainty causes people to go to soft investments

MOST INTERESTING COMMENTS:

“THE CURRENT ACCOUNT DEFICIT OF THE USA IS SO LARGE, THAT THE USA IS BORROWING 1.8 BILLION DOLLARS A DAY. THE CURRENT ACCOUNT DEFICIT IS 166 BILLION, THE LARGEST IN HISTORY. NO ECONOMY CAN BORROW 1.8 BILLION A DAY AND SURVIVE.”

“THE BUSH TAX PROGRAMS ARE BAD FOR THE ECONOMY.”