PDA

View Full Version : Five Reasons For Optimism



Gayle in MD
09-06-2010, 08:12 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Savings. Credit. Manufacturing. Housing. Trade.


1. Savings
Part of the reason consumer spending numbers have disappointed over the last few months is that Americans are putting more money away. Recent revisions to data indicate that the savings rate -- the percentage of disposable income not used for consumption expenditures -- has been higher than originally estimated. It rose from 2.7 percent at the start of the recession in the beginning of 2008 to 5.9 percent in July.

The good news: More households are readjusting their spending patterns to match their incomes than was previously realized. That means consumers should be freer to spend more in the months ahead, even if the savings rate remains unchanged.

2. Credit
There is gradual healing going on in the financial sector that is causing modest, slow improvement in loan availability for households and businesses. The most recent edition of the Federal Reserve's senior loan officers survey showed that more banks have eased lending standards for corporate loans over the preceding months than tightened them, although the overwhelming majority of banks left lending standards "basically unchanged." For companies with access to global capital markets, interest rates and credit spreads remain quite low, despite a recent rise in market volatility, which supports growth.

The dramatic tightening of credit in 2007 and 2008 was a major cause of the recession. The easing of credit will aide recovery, making it easier for consumers to spend and businesses to invest. Keep in mind, however, that the effects of loosening or tightening credit aren't usually felt until several months later. When credit tightened in the summer of 2007, for example, the recession didn't start until December of that year.

3. Manufacturing
The industrial sector is actually holding up okay, despite the softening in overall growth. July industrial production was up 1 percent, and early indicators are that expansion held up last month. The Institute for Supply Management said Wednesday that its index of activity in the manufacturing sector rose in August, to 56.3 from 55.5 (numbers above 50 indicate expansion). While manufacturers are no longer benefiting from rebuilding inventories that were slashed during the recession, it appears that they view final demand for their products as steady enough to keep producing.

To understand why, consider the automobile sector. Americans are now buying automobiles at a rate of about 11.6 million a year, down from a high of more than 20 million in mid-2005. Analysts generally say that demand for autos over the long term is in the range of 13 to 15 million per year, which means that there is significantly more room for the auto industry and its suppliers to ramp up production when people have to replace worn-down cars.

4. Housing
This may seem an odd reason for optimism, given the horrendous data on July existing home sales and new home sales released last week. But those numbers have a silver lining. Basically, housing activity has shrunk so much that it would be hard for it to be much of a drain on future growth.

No one is expecting home-building activity to return to its pre-crisis levels for a very long time, and there's a good chance that nationwide prices will fall further. But in July, builders started work on new housing units at only a 546,000 annual rate, far below the 1.3 million or so units of housing a year needed to keep up with population growth. That rate of construction is so low that the nation is rapidly working off its excess supply of housing built during the boom years. And remember that much of that excess supply is concentrated in places where the regional economy is also in terrible shape, such as parts of California and Florida. There's little excess housing in much of the country.

With housing starts at such a low level, there's just not much more room for it to hurt growth. When housing starts fell from a 2.3 million annual rate in early 2006 to the low of 477,000 in April 2009, it was a major drain on the economy. Even if construction levels were to decline a bit from their current 546,000 level, it would be mathematically impossible for residential construction activity to subtract from growth as much as the 2006 to 2009 collapse did.

5. Trade
The economy was dragged down to an unprecedented degree in the second quarter by a steep rise in imports. Even though exports increased, imports rose much faster, subtracting 4.5 percentage points from the gross domestic product. Had trade as a whole been a net neutral, GDP growth would have come in at a healthy 5 percent annual rate, and the current hand-wringing over the economy would be more subdued.

The question, then, is whether that spike in imports was a onetime anomaly or something more lasting. The increase is a bit of a mystery, not attributable to anything obvious like a jump in the price of imported fuel. It may have been triggered by the lull in orders for U.S.-made aircraft or the spike in imports for wildly popular smartphones made in Asia. But few analysts predict that trade will continue to weaken the economic outlook. And with many other world economies doing better than the United States right now, exports may even be set to rise more than imports in the coming quarters, which would help domestic growth.


By Neil Irwin | September 1, 2010; 2:25 PM ET
Categories: U.S. Economy


</div></div>

http://www.washingtonpost.com/ac2/wp-dyn/search/advanced

LWW
09-06-2010, 04:08 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Gayle in MD</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Savings. Credit. Manufacturing. Housing. Trade.


1. Savings
Part of the reason consumer spending numbers have disappointed over the last few months is that Americans are putting more money away. Recent revisions to data indicate that the savings rate -- the percentage of disposable income not used for consumption expenditures -- has been higher than originally estimated. It rose from 2.7 percent at the start of the recession in the beginning of 2008 to 5.9 percent in July.

The good news: More households are readjusting their spending patterns to match their incomes than was previously realized. That means consumers should be freer to spend more in the months ahead, even if the savings rate remains unchanged.

2. Credit
There is gradual healing going on in the financial sector that is causing modest, slow improvement in loan availability for households and businesses. The most recent edition of the Federal Reserve's senior loan officers survey showed that more banks have eased lending standards for corporate loans over the preceding months than tightened them, although the overwhelming majority of banks left lending standards "basically unchanged." For companies with access to global capital markets, interest rates and credit spreads remain quite low, despite a recent rise in market volatility, which supports growth.

The dramatic tightening of credit in 2007 and 2008 was a major cause of the recession. The easing of credit will aide recovery, making it easier for consumers to spend and businesses to invest. Keep in mind, however, that the effects of loosening or tightening credit aren't usually felt until several months later. When credit tightened in the summer of 2007, for example, the recession didn't start until December of that year.

3. Manufacturing
The industrial sector is actually holding up okay, despite the softening in overall growth. July industrial production was up 1 percent, and early indicators are that expansion held up last month. The Institute for Supply Management said Wednesday that its index of activity in the manufacturing sector rose in August, to 56.3 from 55.5 (numbers above 50 indicate expansion). While manufacturers are no longer benefiting from rebuilding inventories that were slashed during the recession, it appears that they view final demand for their products as steady enough to keep producing.

To understand why, consider the automobile sector. Americans are now buying automobiles at a rate of about 11.6 million a year, down from a high of more than 20 million in mid-2005. Analysts generally say that demand for autos over the long term is in the range of 13 to 15 million per year, which means that there is significantly more room for the auto industry and its suppliers to ramp up production when people have to replace worn-down cars.

4. Housing
This may seem an odd reason for optimism, given the horrendous data on July existing home sales and new home sales released last week. But those numbers have a silver lining. Basically, housing activity has shrunk so much that it would be hard for it to be much of a drain on future growth.

No one is expecting home-building activity to return to its pre-crisis levels for a very long time, and there's a good chance that nationwide prices will fall further. But in July, builders started work on new housing units at only a 546,000 annual rate, far below the 1.3 million or so units of housing a year needed to keep up with population growth. That rate of construction is so low that the nation is rapidly working off its excess supply of housing built during the boom years. And remember that much of that excess supply is concentrated in places where the regional economy is also in terrible shape, such as parts of California and Florida. There's little excess housing in much of the country.

With housing starts at such a low level, there's just not much more room for it to hurt growth. When housing starts fell from a 2.3 million annual rate in early 2006 to the low of 477,000 in April 2009, it was a major drain on the economy. Even if construction levels were to decline a bit from their current 546,000 level, it would be mathematically impossible for residential construction activity to subtract from growth as much as the 2006 to 2009 collapse did.

5. Trade
The economy was dragged down to an unprecedented degree in the second quarter by a steep rise in imports. Even though exports increased, imports rose much faster, subtracting 4.5 percentage points from the gross domestic product. Had trade as a whole been a net neutral, GDP growth would have come in at a healthy 5 percent annual rate, and the current hand-wringing over the economy would be more subdued.

The question, then, is whether that spike in imports was a onetime anomaly or something more lasting. The increase is a bit of a mystery, not attributable to anything obvious like a jump in the price of imported fuel. It may have been triggered by the lull in orders for U.S.-made aircraft or the spike in imports for wildly popular smartphones made in Asia. But few analysts predict that trade will continue to weaken the economic outlook. And with many other world economies doing better than the United States right now, exports may even be set to rise more than imports in the coming quarters, which would help domestic growth.


By Neil Irwin | September 1, 2010; 2:25 PM ET
Categories: U.S. Economy


</div></div>

http://www.washingtonpost.com/ac2/wp-dyn/search/advanced </div></div>

So ...

1 - People are hoarding cash because they fear the state's destruction of jobs.

2 - Credit has improved from nearly impossible to get to merely extremely difficult to get.

3 - Auto sales are only down 40% from the Bush era.

4 - Housing is as bad as it can possibly get and the left is believing it will never get back to where it was.

5 - Our industrial base has been decimated to the point we must import more than ever before.

And you see this as positive?

The piece's arguments boil down to a concession speech that Obamanomics has crushed the economy so severely that it can't be harmed much worse. I concur with that assessment.

Now, 5 reasons to actually be optimistic:

1 - The demokooks will lose control of the house in roughly 100 days.

2 - The filibuster proof demokook majority in the senate will also pass at the same time, and maybe even the demokook majority.

3 - The governorships and state legislatures are also being removed from demokook clutches.

4 - President Obama is already a lame duck POTUS.

5 - The US electorate is more engaged than at anytime I can remember and will not tolerate demokook-lite from the republichicken party again.

LWW