We are in deep trouble. Last week there were conflicting signs of economic performance from the world’s biggest economy, the US. First, the number of new housing projects that builders broke ground on in February rose sharply, defying economists' forecasts for yet another drop in activity.
The US Commerce Department reported Tuesday that construction of new homes and apartments jumped 22.2 percent from January to a seasonally adjusted annual rate of 583,000 units. Economists were expecting construction to drop to a pace of around 450,000 units.
February's pickup was led by a big increase in apartment construction. By region, all parts of the country reported an increase in overall housing construction, except for the West of the US, which led the housing boom and has been hard hit by the bust.
Applications for building permits, considered a reliable sign of future activity, also rose in February by 3 percent to an annual rate of 547,000. Economists were expecting permits to fall to a pace of 500,000 units. Even with February's rare burst of activity, housing construction is down a whopping 47.3 percent from a year ago.
The collapse of the once high-flying housing market has been devastating to the United States' economic health. Its spreading fallout has contributed to big pullbacks by consumers and businesses alike, plunging the economy into a recession now in its second year.
The Obama administration has announced a $75 billion program to stem skyrocketing home foreclosures, which have dumped even more properties on an already crippled market.
More than 2 million American homeowners faced foreclosure proceedings last year, and that number could soar as high as 10 million in the coming years depending on the severity of the recession, according to a recent report by Credit Suisse.
On the other hand, there was some bad news from the US economy. A measure of the economy’s future performance dropped and the number of Americans collecting unemployment benefits surged to a record, evidence that the recession is deepening as policy makers try to unfreeze credit markets.
The Conference Board’s index of leading indicators, a gauge of the economy’s direction over the next three to six months, fell 0.4 percent in February. Manufacturing in the Philadelphia area shrank for the 15th time in 16 months and the US Labor Department said 5.47 million Americans are getting jobless benefits. The number of people on jobless benefit rolls jumped by 185,000 in the week ended March 7. Initial jobless applications last week topped 600,000 for a seventh straight time, the worst performance since 1982.
The economy is still in a mess and manufacturing will not turn around until consumer spending and exports pick up, Today’s figures underscore the picture of a worsening economy. Chairman Ben S. Bernanke forecasts an economic recovery in 2010 as long as policy makers take sufficient action.
Fedex Corp., a bellwether for the economy as the second- biggest American package deliverer, recently reported its first sales drop in at least a decade.
Manufacturing is among the industries under mounting stress. Industrial production fell in February for the fourth straight month, the Fed reported on March 16. National output at factories, mines and utilities dropped 1.4 percent after a revised 1.9 percent decline in January that was greater than previously estimated.
My educated guess is that bad news is now stronger and overriding good news. One still can not see any light at the end of the tunnel. We would have to prepare for a prolonged economic downturn. As people often say we are in this for a long haul.
By Chodechai Suwanaporn email: [email protected]
Source: Fiscal Policy Office / www.fpo.go.th