Consumers and businesses keep telling us conditions are bad. But the recent economic data have been surprisingly solid, pointing to an accelerating recovery. Unfortunately, the economy has had nothing but bad luck and the problems facing Europe and rising energy costs are two more hurdles that must be cleared before solid growth returns.

The economy is expanding and the pace of economic activity quickened during the summer. Third quarter GDP growth of 2.5% is hardly gangbusters but the details of the report were better than the headline. Consumers are spending again with big-ticket purchases leading the way. But more importantly, services demand has come back. This lagging component is nearly two-thirds of all spending and a turnaround here would be welcome news. With October retail sales being even better than expected, it looks like the holiday shopping season has gotten off to a strong start as well. Continue reading »