From the Commerce Department
The US economy grew at an annual pace of 3.5% between July and September,its first expansion in more than a year, helped by a substantial government spending. Durable manufactured products soared at an annualized rate of 22.3%, led primarily by the cash for clunkers scheme lifting car sales.
The housing market also improved, with spending on housing products up 23.4%, its largest quarterly jump in 23 years. Thanks to the home buyers tax credit.The trickle down effect of a new home often means new appliances, lumber and roofing as new owners upgrade. Work. The whole downstream home industry was given a boost.
Your Economy On Steroids
The big picture is great, but is it sustainable.
The massive stimulus of the past year was enough to lift the US economy up and into the sunlight.The Obama Administration is pulling back from the enormous stimulus of the past year. This recovery has been propped and it was a job well done.... now the economy has to find its own footing.
1. Credit Markets: The mortgage purchase program is almost over and the Fed is phasing out its purchase plan. To what extent the banks and other lenders are willing and able to buy and sell credit remains to be seen.
2. Commercial Property: Banks are still facing increasing residential foreclosures and now commercial property failures. Office buildings as well as shopping malls and many apartment buildings that were bought in the last five years, will be looking to refinance. High vacancy rates, renegotiated rents and evaporated equity make these prospects look bleak as they step up to lenders, hat in hand. Many properties are now underwater and the banks are not likely to want more bad paper.
3. Manufacturing: The big car firms have already reported a sharp fall in September sales following the conclusion of the popular $3bn cash for clunkers scheme at the end of August and helped by a cheap dollar.
4. Home Buyers Tax Credit: Congress is considering extending the program due to expire Nov 1. Without it, I think we will see more price drops and fewer sales. Happily, the Mortgage Bankers Association feels sure it will be extended and perhaps increased to $15,000.
The conclusion is that we still have strong headwinds and that any recovery will be a feeble at first. The case for another leg down, or a W recession, looks weaker now. The challenge looking foreward is to get organic growth. If we dont pull back to too fast and the Govt remains vigilant and ready to re-stimulate if necessary, we will emerge lean and ready to forever forgo that bloated debt driven demand that got us here in the first place.
Thanks for Reading
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