American Economy Takes Another Punishing One-Two Punch
A drop in home sales and less consumer spending due to rising gas prices belies government assurances that the economy is recovering.
From The Americano
The welfare of the U.S. economy took major hits on Monday as:
· Sales of previously owned U.S. homes plunged in February and prices hit their lowest level in nearly nine years, implying a housing market recovery was still a long way off.
· Americans surveyed by America’s Research Group said they were shopping less due to rising gas prices, with more than 62 percent of the participants planning to spend generously only next year or beyond.
Neither story was encouraging news for President Barack Obama, who despite a new war abroad and a friendly trip to Latin America, needs a strong domestic economic recovery to boost his re-election hopes in November 2012.
The economic news released Monday did not raise the spirits of those whose political futures will rise and fall with the economy.
First came the story from The National Association of Realtors. It said that sales fell 9.6 percent month over month to an annual rate of 4.88 million units, snapping three straight months of gains. The percentage decline was the largest since July of last year.
According to Reuters, the weak sales were the latest evidence of the malaise in the housing sector and confirmed it would remain outside the strengthening and broadening economic recovery.
“The housing market is still very depressed and a major drag on the economy, especially household net worth,” Chris Christopher, a senior economist at IHS Global Insight in Lexington, Massachusetts told Reuters.
In its story the agency said that economists had expected a decline of only 4 percent to a 5.15 million-unit pace. The actual drop was greater than even the most pessimistic forecast in a Reuters survey of 53 economists.
The only positive light came from some analysts who said that harsh winter weather in January could have curbed February sales.
Meanwhile retailers also faced the real possibility that consumers would be spending less in the months ahead, as rising gas prices cut sharply into their disposable income.
This forecast came from Britt Beemer, president of America’s Research Group who said “the American shopper was extremely cautious before. And now I’d say they are extremely worried.”
Beemer’s comments came as a result of a survey released Monday that showed signs that rapidly rising gasoline prices could make the spring selling season difficult for many American retailers.
Reuters pointed out that about three-quarters of consumer spending accounts for about two-thirds of the U.S. economy.
“What we are going to see happen is that consumers will try and cut back on all discretionary purchases, until finally they are going to have to make a decision at some point what do I really have to give up?” Beemer said.
The national average for a gallon of self-serve, regular gasoline was $3.57 on March 18, according to the Lundberg Survey of about 2,500 gas stations. The current average price is nearly 76 cents above the year-ago level. The price of a gallon of gas has gone up by more than 35 cents in the last month alone, with the price of a barrel of oil well-entrenched over $100.
According to the survey conducted by Reuters, rising gas prices are their biggest concern facing the U.S. economy right now. That was the answer a whopping 62 percent of those who participated in the survey said.
Despite some recent positive signs for the U.S. economy, many Americans are still worried about the health of the world’s largest economy. More than 68 percent of Americans who participated in the Reuters survey said they did not think that the U.S. economy was back on track.
The Americano/Agencies
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