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Five reasons the economy may be about to boom

September 6, 2012 Leave a comment Go to comments

Roger Altman, a former deputy Treasury secretary and a co-founder of the investment firm Evercore partners, thinks the U.S. economy could be on the verge of an unexpected boom. Here’s why:

1. “The housing sector is improving. … the first signs of renewal have appeared: prices are rising in almost half of the country’s major housing markets. Pent-up demand is huge. Goldman Sachs expects housing starts to hit 1.4m annually by 2015, up from 700,000 this year. After 2015, the total will rise further and boost GDP, as household formation rates and the starts-to-population ratio revert to historical norms.”

2. “The breathtaking increase in oil and gas production. Data from the US Energy Information Administration support this. Natural gas output reached an all-time high this year, with shale gas accounting for half of it. On the oil side, U.S. production fell 48 percent from its 1970 high to only 5m barrels a day in 2008. Driven by shale, it is up almost 20 percent from 2008 to 2012. IHS Cera, a research group, projects that oil production will rise another 3m b/d and reach a new high by 2020. Within five years, the oil gains alone could add more than 1 percentage point to annual GDP growth and up to 3m jobs. The fall in natural gas prices will reduce the average utility bill by almost $1,000 a year.”

3. “The U.S. banking system has recovered faster than anyone could have imagined. Capital and liquidity have been rebuilt to levels unseen in decades. Legacy mortgage problems are fading. Profits are very strong. Lending is growing quickly: total bank credit outstanding now stands at $9.8tn, according to Fed data, a record high. The proportion of bank lending going to business will next year probably reach a record level.”

via Five reasons the economy may be about to boom.

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