Wednesday, June 17, 2009

new US homes in April

While the number of new houses being built in the US in May bounced back from record lows in April, industrial production in the same month fell by more than the analysts' expectations.

On the other hand, the Economic Advisory Committee of the American Bankers Association expects economic activity to increase by 0.5% between July and September (Q3/2009), thus providing growth (ie positive growth of the real Gross Domestic Product), albeit not necessarily a stable/steady one, at least not yet, thus not preventing at 10% unemployment rate by early 2010.

The key "link" is the US economy's over-reliance on private consumption (2/3 of GNP) and the correlation between the state of the housing market and its mortgages and jobs. If unemployment comes down, that will affect the housing market in a positive way as well as consumer spending, if the housing market continues to be in bad shape, that will continue to affect consumer spending and jobs. Can a third factor, eg the stimulus spending or something else (what?) "break" this "vicious circle"?

Reminder: In Q1 of this year, the US economy shrank by an annual rate of 5.7%

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