Dow above 18,000 as economy grows, fueling Chicago companies
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On the eve of the Christmas holiday season, news of a revved-up U.S. economy was cause for cheer, and Chicago entrepreneurs have been participating in the party.
The economy grew at a rapid-fire 5 percent pace in the third quarter, the fastest in more than 11 years and above the 3.9 percent estimate the federal government initially reported. The news helped shove the Dow above 18,000 for the first time. It closed at 18,024.17, up 64.73.
Economic growth was driven by consumers and businesses loosening their purse strings. Consumer spending grew at a 3.2 percent rate in the third quarter — the best showing of the year.
“The economy in the last few months has picked up steam,” said Robert Johnson, an economist with Chicago-based Morningstar Inc. “We’ve seen the retail sales numbers look particularly strong. Consumers have been building up savings for most of 2014. They’re finally beginning to spend. A bunch of it is falling gas prices, leaving more cash to spend.”
At $2.47 a gallon, the average price of gasoline in the U.S. is at its lowest level in five years, according to industry analyst Trilby Lundberg.
Mary Aregoni didn’t need to hear the reports to let her know the economy has accelerated. She has been experiencing it firsthand. The founder of Chicago-based Saigon Sisters, which serves up Vietnamese cuisine and operates three sites in the city, has watched sales climb 25 percent this year.
“I definitely see an improvement in consumption in terms of customers not only just dining in, but also the catering sales, things like that are happening,” she said.
Chicago-based GoHealth Inc. is among companies that have made significant capital investments this year contributing to growth in the nation’s gross domestic product. The company helps consumers compare health insurance quotes and purchase insurance through its online portal, and its sales are up more than 30 percent this year, President Brandon Cruz said.
“Positive trends in the economy are helping,” he said.
Those trends are expected to continue into 2015, according to Ariel Investments vice chairman and head of investment group Charlie Bobrinskoy.
“Going forward, we think the U.S. economy is going to stay strong into 2015,” he predicted. “The drop in oil prices . . . will generally be an overall positive for the economy, and interest rates will probably go up a little, but will remain at historically low levels, and third we’re looking for one new positive factor an improving housing market.”
The stock market has been driven higher by high-dividend paying securities, including real estate investment trusts, master limited partnerships and utilities “as people have searched for income,” Bobrinskoy said. “Lately, consumer stocks have done well as the market has come around to our assessment of a strengthening consumer.”
At Art of Athletics, a Chicago-based online women’s athletic apparel business, founder and president Linda Quarshie said consumers are still being cautious, but “business this year was a lot better than last year.”
The Women’s Business Development Center is seeing signs of the economy’s improvement among the Chicago area businesses it assists, said Emilia DiMenco, president and CEO.
“The conversations are different,” she said. “We’re seeing it in three ways. First in the contracting opportunities, corporations committed to supplier diversity are saying, ‘We’ve got to make sure in the procurement process, we’re buying from women and minorities.’ A few years ago, it was, ‘We’re cutting back, not buying as much as we used to.’
“Second, the discussion on capital is about fueling growth and expansion vs. ‘I’ve got an operating problem.’
“And third, people are thinking of starting businesses, expanding businesses because that’s something they want to do vs., ‘I just lost my job.’”
Contributing: Associated Press