We'll Have To Cancel Christmas. And the Children Have Been So Good This Year.
It's a mixed stocking of green shoots this Festivus week. There are positive numbers on industrial production, personal savings, and consumer spending. But Lucy Van Pelt's Christmas gift of choice -- real estate -- is still in such poor condition that the American economy may need some 5-cent psychiatric help. When the holiday's over, we're going to see an economy still sputtering. And the real estate industry, which spent much of this year declaring that it had hit the bottom of the market, will have to confront a 2010 featuring more bottoms than an evening at Paddles.
The good news:
Industrial production increased 0.8 percent in November, while capacity utilization went up 0.7 percent to 71.3 percent. Both figures are well below historic standards, but they are moving in the right direction, per Federal Reserve statistics.
Commerce Department tracks a November increase in consumer spending, which is below expectations but still positive.
Also lower but still positive is the revised third-quarter GDP figure, which comes in at 2.2 percent (a figure that, per Christina Romer's logic, is fully attributable to stimulus force multipliers).
Personal income and personal savings [pdf] are both increasing substantially, with the Bureau of Economic Analysis pegging the savings rate at 4.7 percent for both November (new) and October (revised). As I have noted in the past, the increase in personal savings is neither as remarkable nor as linear as the Obama Administration wants you to believe. But it's at least a substantial short-term number.
Finally, Wells Fargo and Citigroup have repaid their TARP loans. Bully for them.
So why does that guy coming down the chimney look more like Krampus than Santa Claus? And oh no, why is he foreclosing on the nativity scene instead of giving out presents?
U.S. Census Bureau has new housing starts and completions up from October to November, but way, way down from the same period in 2008 -- which you may recall, was not a banner year for U.S. real estate.
More to the point, new home sales are heading back off the cliff, or rather are heading off another cliff after they fell off the original cliff that was, um, higher up the grade, then kept rolling down, even though houses don't have wheels… Anyway, new housing sales are dropping sharply.
Calculated Risk has a chilling tale of the widening ratio of existing to new home sales, and why that ratio is ominous for housing-related economic activity of all kinds.
Meanwhile, real estate is plagued by all the same problems it had yesterday and will continue to have, in even larger portions, tomorrow: collapsing mortgage availability, a shadow inventory approaching 2 million units, the commercial real estate hyperpocalypse, and cockamamie government interventions designed to keep house prices inflated at all costs.
Keep in mind that real estate is supposed to be what's leading this economic recovery we keep hearing about. Maybe in some Keynesian long run this will prove to be true, but people seem to be forgetting something about the shape of real estate busts. Usually house prices don't undergo the kind of rapid shock we've seen over the past few years. Instead they fritter away value slowly, over a period of many years. There are many reasons to believe the slow-frittering phase is just beginning.
So make it a lean Christmas. You're gonna need those Krugerrands.
