Econ Journal Essay

Submitted By jfaub04
Words: 913
Pages: 4

Week 2 – US Fiscal Cliff not yet imminent
Washington made a few executive decisions on taxes. Households with incomes less than $113.7K will still be subject to the %2 increase in payroll taxes; a 4.6% tax hike on incomes higher than $400K ($450K for couples) will occur; incomes above $250K ($300K for couples) will have their personal deductions/exemptions phased out; and finally estates worth more than $5M will be hit with a tax hike as well.
Politics seem to be still a priority when dealing with the fiscal cliff as can be seen by the hold on personal tax rates on incomes lower than $400K as well as the alternative minimum tax being indexed. This will likely lead continued growth and a sigh towards the current administration, however unlikely to resolve or help with getting out of the pit. Yes increasing tax rates like those above $400K and below $113.7K would affect millions; however it would also speed up the resolution of the much bigger issue – the cliff.

Week 4 – 5 year high of new-auto sales
2012 was the new 5 year high in US new auto sales, with an increase of 13% or 14.4 million units. This increase in sales has also been met buy financers and banks with looser credit conditions, longer loan terms and lower interest rates.
This spending is likely a result of the general consumers comfort level with their perceived financial positions; which is likely a result of the average household’s debt-to-income ratio decreasing 75% over the past 5 years. Although this new auto sales number is possibly influenced by Hurricane Sandy replacement demands, it is still a very positive statistic. There is likely a substitution effect between new and used cars, however what can be said to positively affect used auto sales will likely have a positive effect on new auto sales as well.

Week 5 – November 2012 sees an increase in real gross domestic product
Manufacturing output, mining quarrelling and gas and oil extraction, and wholesale and retail trade all experienced growth in November by 0.7%, 0.8% and 0.7% respectively. Mining excluding oil and gas extraction leads the pack with an increase of 1.6%.
These increases will likely result in job growth and/or consumption in areas like Southern Ontario (manufacturing) or Alberta (mining, oil and gas extraction) where the sectors are concentrated. There may also be increases in consumption or job growth in British Columbia or Northern Canada where mining of non-metallic and metallic minerals are largely concentrated.

Week 6 – US retail sales saw increase
US retail sales saw a modest increase of 0.1 %, which is much smaller than the increases of 0.5% in both November and December.
This was likely a result of consumers taking advantage of low pricing and financing, as well as gift shopping for the holidays. If compared to October 2012’s decrease of 0.3%, it is still a significant bounce back. Furthermore when compared to January 2011’s increase of 0.1% it doesn’t seem to be a bad sign.