Thursday, 23 August 2012

US existing home sales rise but Fed considering stimulus as fiscal cliff threatens recession

There was some good news on the US economy on Wednesday. Existing home sales rose 2.3 percent in July, rebounding after a 5.4 percent decline in June that took it to an eight-month low.

Inventory of existing homes did rise 1.3 percent, but Bill McBride points out that this is 23.8 percent down from July 2011, and he thinks that inventory had peaked in April this year.

Despite the signs of a recovery in housing, Federal Reserve officials seem to think that additional stimulus will be needed soon.

“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery,” according to the minutes of the Federal Open Market Committee’s 31 July-1 Aug meeting released on Wednesday.

Indeed, a big threat looms for the US economy. From Bloomberg on Wednesday:

The U.S. economy will probably tip into recession next year if lawmakers can’t break an impasse over the federal budget, according to a report.

The nonpartisan Congressional Budget Office said today that scheduled tax increases and spending cuts in 2013 would reverse the modest economic recovery. Economic output would shrink next year by 0.5 percent, joblessness would climb to about 9 percent with “economic conditions in 2013 that will probably be considered a recession,” the agency said in a biannual report on the budget and economic outlook.

No comments:

Post a comment