More Signs the Economy Is Expanding

Regular readers of Retirement Millionaire know that we've been telling you for several years that the economy is grinding slowly higher. It's why we've been bullish on stocks and bonds during that time.

But while things are improving, we want to make sure things aren't heating up too much in the economy. Severe inflation can hurt our bond investments... and we don't want to be caught off-guard by the start of a downturn or recession.

That's why we watch the money-flow stats from the Federal Reserve, and why I talk to taxi cab drivers on the streets. We want to know what's really going on out there.

This month, we're checking some statistics that tell us what the consumer, manufacturing sector, and service industry are doing. The good news is that things still look good, maybe even a little stronger than this past spring.

The financial news service Bloomberg's Consumer Comfort Index is now at post-recession highs. This 1,000-person telephone interview on the economy, personal finances, and purchasing behavior is showing signs of coming off a multiyear negative territory, as the chart below shows.

In the manufacturing sector, things have turned back up. As the following chart shows, purchasing managers in the manufacturing industry are buying more raw goods and supplies... a sign of expansion for the sector.

Any time the numbers are above 50, that means manufacturing is growing. New orders are also expanding again after also dropping below the 50 mark in the spring.

Finally, the service sector, which is nearly 80% of the U.S. economy, is also showing signs of improvement. The managers making new orders are on the front line of the economy. They make real purchases for future business plans. When the index sits above 50, this is a positive sign for the overall health of the U.S.

As the chart shows below, we've bounced back up from the neutral 50 level where it appeared we were heading this spring.

These three charts point to continued grinding higher for the American economy. As Europe stabilizes and energy keeps getting cheaper in the U.S., we're looking for continued steady economic growth with little to no price inflation here at home. After flirting with possibly slowing in the spring, the economy looks like it turned around and is continuing to grind higher.