Last week produced news that the US economy expanded in the previous quarter. It went up at a 1.8% annual rate, far below the 3% consensus estimate of economists.
That returned it to ’07 output levels, but at what cost? The feds have added $6 trillion in new debt to regain some $600 billion in annual output. Whoa!
My guess is that consumer spending will weaken further as the bear market in housing gets worse. December house sales were the worst in nearly half a century. About 302,000 new homes were sold last year. That's less than the 323,000 sold in 2010, making last year's sales the worst on records dating back to 1963. And it coincides with a report last week that said 2011 was the weakest year for single-family home construction on record.
Savings rates have recently fallen… to 3.5%, down from 5.7%. They will probably go back up and the Great Correction continues.
Which will mean… housing will fall, maybe by 20% more.
Source: Moneyweek
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