U.S. Economy

July 2, 2007

UCLA Forecast says U.S. is “close” to a recession

The sharp drop-off in growth in the first quarter of 2007, and the expected weak second and third quarters of less than 2% growth, caused the widely watched UCLA Anderson Forecast, a leading national economic forecaster, to conclude that although we may not actually be in a recession “it is certainly close.” The Anderson Forecast saw the slowed economy as lasting longer than previously expected. Weakness in the housing market and higher gasoline prices are starting to affect consumer spending. California, hit by a “double-whammy” from construction and mortgage finance, foreshadows a drag on the rest of the economy.

“Weakness in the real estate sector will finally spill over into the job market as the combination of job losses in construction and real estate finance pull overall payroll job growth in California to less than 1% for the next five quarters. Unemployment will rise to 5.5% and broad measures of real output (Gross State Product and Personal Income) will grow at a less-than-average rate of just-below 3%. The Forecast believes that weakness in the housing sector will finally spill into consumption spending, noting that retail sales stalled in April and that auto sales have been weak.

With housing and consumption both “down,” the strength of the national economy lies in the rest of the world. “The global economy is booming,” the report states “Indeed, it is the strength of the global economy that is powering the stock market to new highs (and) it is no accident that the Wall Street rally is being led by the giant global corporations who are benefiting most from the worldwide expansion.”

Filed under California Economy, U.S. Economy by

April 19, 2007

Dollar dropping against Euro

Might be a good idea to put off that European vacation (as it will cost you a small fortune) and cruise around California instead. According to Bloomberg:

The dollar is poised to decline to a record low against the euro and extend its drop versus the pound on speculation U.S. economic growth is slowing, dimming the value of the currency. The U.S. currency fell yesterday as investors bet the Federal Reserve will cut borrowing costs as inflation slows, while the European Central Bank and Bank of England will keep raising rates. The dollar also fell against the yen as investors reduced holdings in higher-yielding assets funded by loans in Japan, unwinding what are known as carry trades. “The euro is obviously testing its historical highs,” said Axel Merk, head of Merk Investments LLC in Palo Alto, California. “We are going to breach those in the near future”.

Filed under Europe, U.S. Economy by

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