Admission is the First Step to Economic Recovery
They say admission is the first step to recovery. In the case of our economy of late, the first of many steps!
President Bush acknowledged today that the country is facing a pretty deep bowl of challenges both within the housing and financial markets. Always the optimist, the Prez did stress his confidence that the economy would recover.
The reasons we’re in a major slowdown center on U.S. consumers, who drive the economy. Throughout the past half-decade, we’ve been the most maniacal spending machines the world has ever witnessed. So what happened that slowed our spending? Americans consumers now face a weaker dollar, soaring prices for gasoline, which in turn means rising prices for food. Food and gas are obviously essentials for most consumers which continues to drive the spiral downward.
Although last month’s foreclosure filing data showed a very disturbing rise to a record 60%, somehow unemployment numbers are remaining low. The President went on to remind consumers that the $170 billion stimulus package should help spur growth once checks start appearing in mailboxes all across the nation.
A bit of good news comes in the form of the fact that inflation hasn’t yet soared to levels predicted earlier. In fact prices did not move at the end of February. However, even without jumping up last month, overall prices are still 4% above where they were 12 months earlier (but still down from the 4.3% rise seen in January).
The relief in inflation may only be temporary however. Average gasoline prices fell 2% in the month of February which acted to drag down overall inflation. Unfortunately, March has already witnessed gas prices 3% higher than the highest level of February. We won’t know until March concludes, but it is shaping up to appear that inflation may have only taken a one-month break. So much of our economic status depends upon the trade of oil and lately these figures continue to surpass long-standing records.
As I’m writing this post, news is developing of the stock market taking but another tumble after news that Bear Stearns requires emergency funding due to a liquidity crisis. Naturally fears that the credit crunch continue spreading. As the stock market falls, bond prices surge as investors seek the comparative safety of government insured debt.
