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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: jim_p who wrote (11368)	12/31/2001 1:34:01 PM
From: The Ox	Read Replies (1) \| Respond to of 23153

Real spending on residential structures shows a very different story. This spending includes construction of all new homes and apartments as well as additions and alterations to existing homes. While recent data and those in our forecast bounce around quarter to quarter, there is no sign of a recession in this sector. This pattern is in sharp contrast to the deep recession that occurred in 1990-91 when spending on residential structures fell sharply for three consecutive quarters. Like consumer spending, spending on residential structures has been buoyed by declining interest rates and consumers' expectations that their permanent incomes will not be marred significantly by what is expected to be a mild recession. But like consumer spending, there are downside risks to residential investment if consumers become much more wary that their economic wealth might decline further. Because of price cutting and zero financing incentives, consumer purchases of motor vehicles skyrocketed in October and November. However, December sales are beginning to sag, and sales in the first quarter of next year will depend critically on whether there are further price inducements. Recent fleet and rental car purchases have fallen off sharply, and bulging used car inventories are likely to cut into first quarter new motor vehicle sales. Our forecast of consumer spending is stronger in the fourth quarter and then weaker in the first quarter because of variations in the level of auto purchases. The retail sector is expecting only modest Christmas spending with consumers directing their purchases toward "big box" outlets. In our forecast, consumer spending growth accelerates slowly in 2002 and more rapidly in 2003. We are expecting near-term GDP growth to be negative in the fourth quarter and flat in the first quarter. Then we are expecting a relatively slow recovery beginning in the second quarter of next year. There are risks on both sides of this forecast. Stock and bond market activity over the past month or so suggests that financial players are expecting at least as much growth as we are forecasting, and perhaps more. There is at least a small possibility that the stimulus from monetary and fiscal policy (provided we get a fiscal package) will cause a burst of growth starting around the middle of next year. However, there's also a significant downside risk to this forecast. We are bound to see a string of poor earnings announcements for several more quarters as well as further layoffs and a rise in the unemployment rate. If consumers become more pessimistic in 2002, we could see significant declines in the stock prices, and consumer spending and residential investment would likely fall below the levels predicted in our forecast. From: Message 16845634 PS. Check out the "NOTES" thread header page for lots of good links. You can click here: Subject 37468 Happy New Year Everyone!!!