Garnet Capital Advisors Blog

U.S. economic conditions continue to improve at a time when the nation is benefiting from increased growth, falling energy costs and sustained job creation. 

Falling energy prices
Gas prices have plunged more than 50 percent since early 2011, falling to an average of $2.06 per gallon during the week starting Jan. 20, according to CBS News. This figure compares to a cost of $2.45 and $2.13 one month and one week before, respectively. 

As a result of the sharp declines, analysts have predicted U.S. drivers could save $700 in 2015 simply on their gas prices, the media outlet reported. When the impact of this marginal windfall is assessed across the nation, it could add up. By putting more resources in the hands of consumers, this benefit could help push spending higher. Consumers are also more optimistic and willing to add debt.

Continued job creation
Another development that could help improve the situation of these key individuals is the economy's continued ability to create jobs. Between December 2014 and October 2015, the unemployment rate dropped to 5.8 percent from 6.7 percent. 

Employers bolstered their payrolls by 2.64 million jobs during the year ending in October, up from the 2.2 million they added in the year that ended in February. This acceleration points to job growth that is speeding up, after lagging at modest levels for years. 

Amid these positive developments, the labor market could stand to benefit from continued improvement, as many would-be workers are avoiding the labor market and others are currently in positions that fail to harness their skills, according to CBS News. To return to the employment level the nation enjoyed before the Great Recession, the U.S. would have to create 4.6 million new positions. 

Inflation concerns
While the economy continues to show signs of strength, one development that is causing concern for policy makers is lackluster inflation, The New York Times reported. Many have expected these price level challenges considering the sharp declines that oil has experienced recently, Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said in an interview earlier this month. 

On the other hand, Plosser predicted that in the next four to six months, inflation will come closer to the central bank's target level, according to the news source. While the price level will undoubtedly play a role in the timeline Fed policy makers use to hike interest rates, analysts recently predicted the central bank will hold tight for a bit longer before making any rate decisions. 

What this means for lenders
As Americans see their economic situations improving, they are obtaining improved access to credit. This development could easily help push loan origination higher, providing tailwinds to financial institutions. However, these organizations must also keep in mind that easier credit could generate a rising incidence of default.