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2006 Economic Outlook

Insights from Scott J. Brown, Ph.D.
Chief economist within the Equity Research Department
Raymond James & Associates Inc.

2005 Highlights

• Consumers did not cut back on spending despite increases in out-of-pocket healthcare costs, homeowner's insurance, food, and energy costs.
• Instead, consumers dug into savings, borrowed, and used home equity to smooth the increased costs.
• Household income did decline slightly. By contrast, wealth gains showed substantial growth thanks largely to home equity.
• High energy prices caused on overall boost in inflation, while core inflation remained low.
• Net capital inflows (foreign investment) continued to increase, keeping long-term interest rates down.

2006 Outlook

• Job growth will remain strong.
• Real wages could show some growth as productivity continues to improve.
• Business spending growth should be moderate without any major capital spending.
• Energy prices are likely to pull back from fourth quarter 2005, adding to consumer purchasing power.
• Labor cost pressures remain modest (wage gains offset by productivity growth)

Click here to read Dr. Brown's complete December 2005 report.

Dr. Brown is the chief economist for Raymond James & Associates, Pinnacle's partner in providing investment service to clients.

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