What is going on in the Economy?

During the recent G-20 meeting in Toronto, Canada, the European Union nations stated that they wish to reduce their deficits significantly by 2014.   If they are serious about reducing government spending, we would see some improvement in the world economy.  Additionally, Americans will need to wait to see if Congress will reduce the amount of additional spending, over and above current revenue to the treasury, without raising taxes.  Recent surveys of the consumer shows that their confidence level has fallen to below the level of March 2010 and has given up the gains for the last 90 days.  As consumer confidence softens, the amount of discretionary spending by the consumer also softens.  Below is an article written by CNNMoney.com for you to review.

NEW YORK (CNNMoney.com) — A key measure of consumer confidence fell in June, reversing a three-month gain, as Americans remain nervous about the job market.

   The Conference Board, a New York-based research group, said its Consumer Confidence Index dropped to 52.9 in June from 62.7 in May. It was the lowest level since March, when the index stood at 52.3.

   “Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence,” Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement.

   Consumer confidence had been recovering slowly since the index hit a record low of 25.3 in February 2009, but the gauge is still far from a reading above 90, which indicates the economy is stable and 100 or above, which indicates strong growth.

   Economists pay close attention to measures of consumer confidence as a proxy for consumer spending, which drives the bulk of the U.S. economy.

   “Today’s report on confidence provides little reason to expect a meaningful pickup in consumer spending in the near term,” said Jim Baird, partner and chief strategist at Plante Moran Financial Advisors.       “Consumers are still exceedingly nervous about the jobs market.”

   “Although the economy is growing, consumers recognize that employers remain hesitant to hire and jobs are still hard to come by,” Baird said.

Economists expect the government’s monthly jobs report for June to show a decline of 100,000 jobs after temporary Census hiring led to the biggest monthly job gain in ten years during May.

   Meanwhile, the government said last week that the economy grew at a slower pace in the first three months of this year than previously estimated.

   Gross domestic product, the broadest measure of the nation’s economic activity, grew at an annual rate of 2.7% in the first three months of 2010, according to the Commerce Department, down from the previous reading of a 3% rise. 

What does all this mean?  For the past two months I have been searching information outlets looking for data so that a trusted forecast could be made to our members.  The data is sound.  Here are the facts:   

• New construction will near 300,000 units for 2010, the lowest in unit count in years.
• Sales of merchandise will soften.
• Housing inventories will inch upward in the near term.
• The median price is up 4% in the past year but will flatten near term.
• New hires in the private sector are minimal.
• Housing interest rates will continue to be very favorable near term.
• GDP growth was 2.7% for the first quarter adjusted downward.
• Commercial real estate will continue to soften during 2010.
• We will remain in a buyers market for some time.
• Frugal spending will return short term.
• Stock market closed below 9,000.  
• The value of the dollar may have reached its floor and is beginning to strengthen.

• The Fed Chairman continues to hold interest rates at their current rate.
• Inflation is still flat, but expect some movement upward later in the year.
• Banks profits continue to improve.
• Appraisals have become more realistic; however, some appraisers still use foreclosures and short sales in their mix of comparables forcing values downward.
• Cost of a barrel of oil is still trading in the normal range and supply is still greater than demand.
• Remember, the BP oil spill never made it to market.
• Unit number of foreclosures will continue to increase short term awaiting a rebound in the job market.

   The public is hopeful that following the November elections, the new Congress will rein in government spending substantially.  Until the elections, the pubic is unsure about their financial future and the financial future of their children and grandchildren.  A wait and see attitude will creep into individual thinking for the near term, causing further slowing of the economy.  

   Here is the great news.  Maslow’s Hierarchy of Needs demonstrates that there are three items that everyone must have.  Those items are: food, shelter and clothing.  Fortunately, we are shelter specialists.  If the economy slows further, they will need our services even more than before.  Isn’t it great that you are positioned to help those consumers that need your help now?  What the consumer needs to hear from you is that now is the time to buy or sell a home and you are just the right person to help them.  The Southern Region wishes everyone the best during 2010!