Protecting Your Resources No Matter the Economic Direction

By Glen Olpin, Senior Vice President & Chief Economist

As economic expansion in the United States continues, we are approaching one of the longest-running periods of growth on record, with the 120-month benchmark likely to be surpassed in 2019. We expect this positive trend to extend through the year.

Overall economic growth, as measured by gross domestic product, has seen ongoing improvement in Utah and neighboring western states. These have been among the top states in economic strength and we believe such strong performance will be ongoing.

Consumers are leading the recovery, their confidence being at an all-time high. Households are spending more and increasing debt levels. Personal income is up from last year, driven in part by tight labor markets. Low unemployment rates and an abundance of new job openings are applying upward pressure on wages.

Tax reform and regulation relief have encouraged stronger industrial production. Capital expenditures remain robust. The business sector should demonstrate durability comparable to the consumer segment, boosting economic security. However, issues of concern for stock and bond markets—weakening global indices, fears of ongoing trade wars, border security disputes and gridlock in Washington—may impede broad economic gains.

Home prices are rising more quickly than upticks in personal income, although the pace of price increases has slowed. Mortgage rates should gradually increase. The higher cost of housing, lower income gains, and long-term rate increases are reducing affordability for owners, with little near-term relief in sight. Moderate increases in sales are expected.

Positive underlying economic fundamentals supported the auto industry in 2018, but as manufacturers pay more for labor and materials, consumers will bear much of that burden. Demand for new vehicles is expected to cool somewhat this year, as buyers become more selective and price-conscious.

Indications suggest that inflation doesn’t pose a serious threat to the economy. Accordingly, following a series of minimal short-term rate hikes, the Federal Open Market Committee pushed the pause button, presumably for the first half of 2019.

Longer-term rates have seen small, sustained increases and are expected to go up slowly. The flattening yield curve, more moderate overall growth, a narrowing labor situation, and rising wage pressures give us mixed signals as to future financial strength.

Although challenges and market fluctuations will continue, we expect this year to generate solid economic results. As America First members, you can be assured that we will provide flexible, affordable, and convenient products & services that fit your changing needs.