As the US staggers towards the hopeful approval of the $US700 million bailout plan, starting with the US Senate sometime this morning (Wednesday night in the US), the shape of the US economy continues to wobble.
The US Commerce Department produced yet another set of gloomy figures for the month of August which showed that US consumers virtually shut up shop.
US house prices continued sinking, despite signs of a bottoming out in some metro areas. The weight of the slump in the western states of Nevada and California is still too powerful (See the above graph).
Economists say such has been the downturn in August, that September and October’s figures could be terrifying, given the sharp worsening in the health of financial markets from around September 9 to 16 onwards.
Manufacturing contracted and car sales tumbled in September.
Personal spending stagnated in August with the Commerce Department figures showing that spending had fallen to levels last seen in February when the US economy was in the grip of the first round of the crunch.
Economists had forecast a 0.2% increase in personal spending as the lingering after effects of the tax rebate finished moving through consumers’ bank accounts and credit cards.
And while an 0.5% rise in personal income in August (after a revised 0.6% decline in July) was good news, after adjusting for taxes and price changes, the Department said real disposable income fell 0.9% in the month
The boost in consumer spending from May and June was thanks to billions of dollars in tax rebates which boosted activity, but not as much as first thought.
Last Friday’s report that second quarter gross domestic product had been revised down to an annual rate of 2.8%, from the second estimate of 3.3%, was driven by a cut in consumer spending and a lower than estimated impact from the still strong trade account.
Now economists are forecasting the third quarter will produce a negative reading for GDP as many important indicators in July were not as strong as in the closing months of the second quarter.
Retail sales, industrial output and durable goods orders all worsened by more than expected and it’s continued into September, according to reports from businesses and some early estimates from forecasters.
reports out overnight showed construction spending fell in August and manufacturing slumped to its lowest level last month since the 2001 recession as exports and domestic orders worsened.
Meanwhile the Standard & Poor’s Case Schiller House Price Index showed a 16.3% drop in the prices of single family houses in the year to July, with the monthly decline accelerating to 0.9% and the overall fall from the peak in July 2006 of 19.5%.
The index of 20 metropolitan areas fell 0.9% in July from June and the composite index of 10 metropolitan areas dropped 1.1% in July for a 17.5% fall in the year to July.
S&P said there were signs of a slowing in the rate of fall with home price declines since May slowing to about a third of the rate of the two previous three-month periods.
"For the three months of May thru July, home prices cumulatively fell about 2.2%; whereas for the three months of February thru April, and November 2007 thru January, the cumulative rates of decline were closer to 6.0-6.5%," S&P said in a release.
"There are signs of a slowdown in the rate of decline across the metro areas but no evidence of a bottom," David Blitzer, chairman of S&P’s index committee, said in the statement.
“Little positive news can be found when cities like Las Vegas and Phoenix report annual declines as large as -29.9% and -29.3%, respectively, and all 20 cities are still in negative territory on a year-over-year basis. The Sunbelt continues to be the story, with the seven cities that basically represent that area reporting annual declines roughly between 20 and 30%.
"While some cities did show some marginal improvement over last month’s data, there is still very little evidence of any particular region experiencing an absolute turnaround.”
"Las Vegas remains the weakest market, reporting an annual decline of 29.9%, followed by Phoenix and Miami at -29.3% and -28.2%, respectively.
"Atlanta, Dallas, Minneapolis and Tampa showed improvements in their annual and monthly returns, but all four are still too close to their recent lows to determine if the markets have stabilized.
"While their annual returns are negative, Atlanta, Boston, Dallas, Denver and Minneapolis all reported positive returns for the three months or more."
And Moody’s a rival ratings agency, is not upbeat on US housing, now warning that a bottom might not appear until 2010.
That’s later than previously thought, and more American home builders could fail before the housing market steadies and starts recovering.
Upheaval in the financial markets is making credit harder to get, both for home builders and consumers, raising the risk of more job losses, mortgage delinquencies and foreclosures, Moody’s said in a report released Tuesday in the US
"The crisis in the U.S. financial system makes clear that the troubles in the housing market and the broader economy will likely worsen before they improve," Moody’s said.
While some housing indicators may bottom out around the end of this year, "we don’t expect the overall housing market to show any significant improvement until at least 2010," Moody’s said.
Previously, the credit rating agency had called for the housing market to bottom around mid-20
