Economics Update

Note: Red denotes contraction, and yes, this is scary.

I guess that the lede is that the consumer confidence numbers are out, and that they remain near record lows, at 26, just one point above the all time low reported in February.

If that were not enough, we now have a survey indicating that consumer spending may fall by $1 trillion after the recession is over (by way of perspective, the US total GDP is about $14 trillion) according to the AlixPartners Long-Range Economic Outlook Survey.

That's a 7% haircut on GDP, exclusive of the secondary effects, closed stores, warehouses, etc., once the economy recovers.....Great googly moogly!

In the meantime, I don't think that a whole bunch of people will be tapping their home equity, as the Case-Shiller home price indices show a 19% drop in home prices, though it appears that defaults are abating, as private mortgage insurers saw defaults, and claims, fall in February, the first decrease since June, 2008.

Additionally, 2nd home sales fell in 2008, down to 30% of total home sales, from 40% in 2005, and more of these buyers are paying cash, which implies that a lot of the contraction in this market is an inability to find mortgages.

In terms of the general state of the economy, the Restaurant Peformance Index is showing the 16th straight month of contraction (h/t Calculated Risk), and the Philadelphia Fed State Coincident indices have shown a decline in all 50 states (pdf), for both the past month and the past three months (again h/t Calculated Risk).

Meanwhile, we have an indication that the Bank of England is looking at significant inflation, they have adjusted their pension investments to account for it, so I think that they expect the £ Sterling to fall, and inflation to increase in the UK.

In any case, we now have the chief economist for the OECD suggesting that the Federal Reserve would take aggressive action against a precipitous fall in the dollar, and work to maintain its position as a reserve currency.

I think that this is more an attempt to talk up the dollar than anything else, because protecting the dollar would, over the long term at least, require higher interest rates, which would have the economy collapsing like overcooked broccoli.

In any case, the dollar was down today, largely because the flight to safety yesterday following Obama's announcement that GM and Chrysler were on notice is now over.

Oil was up too, though it's still a bit under $50/bbl.