What do your personal finances have in common with the U.S. economy? Both are heavily impacted by energy costs and home prices.
In recent years housing and energy have taken their toll. Rising gasoline and heating/cooling costs have gobbled up family income while a depressed housing market erased family wealth and left Americans feeling uncertain about their economic prospects. All of this created a tremendous drag on the economy, but now there appears to be some good news.
Gasoline prices have gone down 11 percent in the past six months — back to levels not seen since early 2007. And, for the first time in two decades, the U.S. is relying less on oil and gas imports. The development of hydraulic fracturing, or fracking, of shale deposits has done much to drive down energy costs. Fracking releases previously inaccessible energy deposits in a cost-effective way by injecting water, sand, and chemicals at high pressure to fracture the surrounding rock formations.
Gas and fuel oil costs have a major impact on our economic well being.
They account for nearly 10 percent of the U.S. Consumer Price Index. Those costs fell 0.8 percent in the past year and are predicted to fall 5.5 percent in 2014.
Thanks in part to that dip in energy costs, consumer prices rose less than two percent in the past year. Economists predict the same thing in 2014.
This is the first time in half a century that prices have climbed so slowly in two consecutive years of economic growth.
Meanwhile housing values are slowly recovering from the near collapse that began in 2008. According to the respected Case-Shiller Index of home values, the average home price in metro Atlanta has increased by 13.6 percent over the past year. We’re not all the way back, of course. Home prices are still down by 16.67 percent from their July 2007 peak.
The economy is hardly on fire, but these trends are two good reasons to believe that a more solid recovery and better times lie ahead.
How are you feeling about the economy and your financial prospects? Are you more confident than a year or two ago? How is your mindset affecting your spending and investing?