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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (20513)	1/5/2005 4:00:30 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

"Perhaps 2005 may finally be the year when we discover the true relationship between house prices and consumer spending." ..... "On the surface, the impact of a 20 per cent decline seems likely to be huge - in value terms it is worth 60 per cent of GDP." ..."It is a clear downside risk," Ms Baker said. "But our central case is that consumer spending does not fall in response to big housing market movements." Since there was no clear evidence that the housing boom fuelled consumption, it was not a compelling argument that a reversal would slow consumption, she said. [Does this seem idiotic to anyone? Look at all the furniture, carpet, applinaces etc that typically go along with a housing boom. mish] Heinz: there are actually US studies (i believe by the Fed's research dept.) that show that the impact of house price movements on consumer spending patterns is much more pronounced than the impact of moves in the stock market. iow., the so-called 'wealth effect' (i think it should be called 'phantom wealth effect') is very much connected to house prices.