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Economy is slowing down take a look

The reports coming this week and the stock market all point to sluggish economy. How do you measure these changes and how do you quantify them into real numbers? One of the biggest tool is the GDP (gross domestic product) that measures the total output for an any country in a given time period. The First quarter GDP for US was 1.8% and the current quarter is estimated at 2.8% which is down from last quarter 2010 from 3.8%. These contractions tells you that the economy is slowing down and cannot add jobs fast enough to overcome the 9.8 % jobless rate.

About 230,000 jobs were added in April and if the economy starts adding lesser numbers they are not enough to drive down the unemployment rate. When the weak economic data came Federal Reserve chairman came out and started saying this is just a blip and things will recover soon. But if previous recessions are any indicators, weak and uneven recoveries lead to standstill job growths over a number of years. Washington’s aggressive action under President Obama were responsible for major push in 2008 and 2009 but since they are muted this could be another deary road wrapped in disappointments in 2011.

Is the economy slowing down ? Take a look at this chart of S&P 500 .

Here is a recent chart of $SPX showing the sideways motion since last 2 months. The market peaked in April and since than has floated down slighting without its ability to stay above its 50 day moving average which is a benchmark for a bull market. There has been numerous days of selling and the market keeps on performing badly. Stock market is a barometer of how things are and is a forward looking instrument.

The gas prices are hitting $4 remains critically important undermining public’s confidence and spending habits which form 70% portion of GDP. Many households are struggling with high gas prices. This has led to the lower GDP numbers in first quarter.

Secondly the housing market is declining. Both new home sales and pending home sales have come in lower than previous months. On the other hand a wave of foreclosed properties are coming into the market and with about 1 million homes estimated to be foreclosed this year in 2011 alone. This will keep housing markets depressed for a long period of time into 2014 and 2015.

Thirdly the manufacturing activity slowed down as result of canceled orders of factory goods according to Federal Reserves numbers for local regions in Mid west. This slugging activity is not a harbinger for job growth as factories do put off hiring workers.

All these problems add to the insecurities of consumers who hold back spending.

Among all of this President is conducting 3 wars in 4 countries at the moment, namely Iraq, Afghanistan, Libya and Pakistan where Osama Bin Laden was killed. Congress has just passed a War weary defense bill for $690 billion dollars with both congressional Democrats and Republican questioning President’s war spending. Obama admin has requested 119 Billion or roughly 10 billion dollars a month just to spend on Iraq and Afghanistan wars this year. This also means wars are not ending anytime soon. Something to consider when you have such a weak economy at home and 15 million people unemployed why would you spend 10 billion on Wars ? There are 59% people who oppose these wars and just about 37% who don not. Clearly its time for Washington to heed to public’s desires and the Congress is just doing that, but will a ‘ Tougher than George Bush’ President elect in the Office at the moment would listen ?

However there are some streaks of bright lights in all of this. US auto industry is recovering nicely and Chrysler which is owned by Fiat just paid off Gov loans. US auto industry is hiring back laid off workers and vehicle production should pick up. What do you think? Leave your comments.

{ 2 comments… read them below or add one }

Robel Gass June 16, 2011 at 3:54 pm

I see that the economy is slowing down. My business is down with it


Reed Carrel June 25, 2011 at 12:09 am

Pretty nice post. I just stumbled upon your blog and wanted to say that I have truly enjoyed surfing around your blog posts. After all I’ll be subscribing to your feed and I hope you write again soon!


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