Counting on a recovery? The answer's a resounding MAYBE

Posted Jul 26th 2009 3:40PM by Tom Johansmeyer
Filed under: Economic Data, Housing, Recession, Financial Crisis

The economy is sending mixed signals right now.

Unemployment is up, and consumer sentiment is down. Plenty of companies are posting profits, but they're taking advantage of lower expectations and cost-cutting rather than revenue growth from an economic recovery. Rents are under pressure – both residential and commercial.

On the other hand, trade and government stimulus activities may have counterbalanced natural market forces, as the economy contracted only 1.5% for the second quarter of the year, a vast improvement from Q1's 5.5% rate.

Orders for long-lasting goods fell, and new home sales moved higher. The latter was up an estimated 2.9% in June and is tracking to an annual rate of 352,000. This measure hit an all-time low in January. Even with sales up, prices are still moving downward and is expected to show a decline of 17.9% from May 2008 to May 2009.

But, it all comes back to you and me. Consumer spending accounts for 70% of the U.S. economy, and high unemployment rates are going to keep those wallets shut tight for quite a while. Unfortunately, a bit of comfortable spending is what will drive a recovery, making every other improvement marginal at best.

Tags: consumer sentiment, consumer spending, financial crisis, home sales, housing, housing market, inthenews, new home sales, recession, stimulus, stimulus plan, unemployment, unemployment rates