Many people were shocked to find that not only did new home sales on grow in number, but they plunged by a huge 11.3 percent to levels not seen since April.
To show how bad the drop was, economists from Thomson Reuters were looking for sales to grow at a pace of 440,000, while the annual rate, which was adjusted for the season, was down to 355,000. That’s down nine percent from the same time last year. This is why bankers need to think twice before reconsidering offering commercial loans they’ve already refused to offer, which the Obama administration has been pushing them to do.
Also falling was the median sales price of a home, which fell to $217,400; close to a two percent drop from the median sales price of $221,600 last year.
What remains to be seen is if increasing the number of hours worked and hiring for Christmas will have any type of sustainability going into the new year. Even in good retail years there are significant cutbacks until spring season comes.
Consumer spending is especially watched in America because it accounts for 70 percent of economic transactions. Not that almost all of the government gimmicks are running their course, we’ll get a better look at how the economy in the first quarter of 2010, and if these numbers suggest anything, it’s that things aren’t looking good, and are probably worse than many had believed and hoped them to be.
Some are trying to generate more hope from the November retail sales numbers, which showed a 1.3 percent increase in sales. The problem is most of that was generated from discount sales. So once the quarterly results come in from most retailers, we’ll find that while they may have generated decent sales, the margins will be so low as to negate the impact on the bottom lines of these companies.
Once you factor in inflation, income after taxes is only growing at a rate of 1.2 percent annually. Add to that consumers paying down their debt and putting away more money, and the majority of economists believe that 1.2 percent isn’t enough to generate a real economic recovery. After taking care of their needs, there simply isn’t enough money left over for consumers to spend much. Nothing in the short term will change that in any way.
There is very little lending going on, and in spite or pressure from Obama to get banks to lend, it would be irresponsible for them to respond and do it and put themselves in an even more vulnerable financial place than they are. The truth is, just about any commercial entity which qualifies for a loan has been accessed a loan or denied already. Taking a second or third look at the bottom line of the companies will change nothing, because nothing has changed in the economy to warrant that.
So the first quarter of 2010 will give a more realistic look at the true health of the economy as the government stimulus funds dry up and artificial props are removed out of the way to give us the look nobody seems to really want to see.
The only thing that may change that is if another round of stimulus funds is poured somehow into the economy. But that’s a huge gamble by the Obama administration because there is already a growing public sentiment that government has gone out of control with the bailouts, and because there really is no recovery happening that we can see yet, buying time with another stimulus, which would cost taxpayers billions, could backfire so strongly if the economy continues to lag, that it could effectively end any chance of Obama being re-elected, and would even further devastate the Democratic party in the 2010 elections.
Now that the government cut its estimate for third-quarter growth from 2.8 percent to 2.2 percent for gross domestic product, we see that wishful thinking and positive spin can’t get rid of the economic realities we continue to face. We’re in for a long ride, and the government needs to keep its hands out of the market like it should have from the beginning.
Nothing of any significance has come about from the spending of billions in tax dollars in attempts to spur the U.S. economy, as these latest numbers show. We simply need to ride this out with no more government interference in the market and give consumers time to pay down some of their and build up cash reserves so they feel confident in spending again.
