August 16, 2009
Federal Reserve policy makers said last Wednesday that the recession appeared to be hitting bottom. Among the end-is-near indicators was consumer spending, which they said had begun to stabilize.
On Thursday, the Commerce Department reported that retail sales fell in July, after rising in May and June. It turns out that the earlier boosts had come mainly from higher prices for necessities like energy, not from more spending on more items. And while the government’s cash-for-clunkers program increased car sales last month, retail sales on everything else fell by 0.6 percent, a much worse showing than economists had expected. The downbeat news was reinforced on Friday, when the University of Michigan’s consumer sentiment index also fell unexpectedly.
Consumer spending accounts for nearly 70 percent of economic activity. So the latest data could be a warning that the recession is not bottoming out, as the Fed believes. Or — almost as grim — the data may be evidence that hitting the bottom will not be followed by a rebound, but by a long spell of very weak growth.
The good news is that over the next several months, stimulus spending is likely to lift economic growth considerably. But the headwinds are also considerable.
Policy makers, eager to declare the recession over, need to pay close attention and be ready to do more to rescue the economy. Otherwise there is a high risk that once the stimulus begins to fade, the economy will too.
Consumer spending will not truly recover until employment revives. Unfortunately, job growth is not expected to resume before next year. From there, it could take another two years or so to recoup the devastating job losses of this recession. Spending will also be restrained as households work off their heavy debt loads and try to rebuild the trillions of dollars of wealth they have lost in the housing and stock markets.
At the same time, families will face more pressure from higher state taxes and from cuts in public services. The 2010 fiscal year for most states began on July 1, but new budget shortfalls have already opened up in 13 states and the District of Columbia, totaling $26 billion.
The financial system is also not out of the woods. Commercial property loans — there are $3.5 trillion worth outstanding— are increasingly prone to default. Midsized and smaller banks, heavy lenders to developers, are especially in harm’s way. Many will fail, and as they do, credit will become even harder to come by for businesses and consumers. And the residential foreclosure crisis continues. There were more than 360,000 foreclosure filings in July, yet another record, according to RealtyTrac, an online marketer of foreclosed homes. Foreclosures usually mean financial ruin for the defaulters. They also mean reduced property values for everyone else.
Joblessness, weak spending and state fiscal distress will all require more federal spending — on unemployment benefits and aid to states. That will help to replace the demand that is lost as consumers retrench. Bank weakness will require federal regulators to efficiently shut down insolvent institutions, so that losses do not deepen and make eventual failures even more damaging. Mounting home foreclosures will require the Obama administration and Congress to come up with alternatives to current — inadequate — relief efforts.
It is already clear that policy makers need to do more to ensure that whenever the bottom comes, the economy does not stay mired there. |
狗仔卡
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显身卡
发表于 2009-8-17 13:23:34
