The end of the third quarter produced some good economic news, sending hopes that the economic recovery is picking up momentum. According to the economic data which was released on Monday retail sales in the United States went up in September as Americans made more purchases of just about everything, from cars to electronics.
In less good news manufacturing slowed in again October in New York State, although the size of the shrinkage was not as large as September’s manufacturing slowdown.
Retail sales advanced at a pace faster than what was originally expected; 1.1 percent in September, according to Commerce Department data.
This increase in consumer spending is great news for the economy because purchasing accounts for as much as two-thirds of economic growth.
“This is a good end of (the) third quarter and we have some good momentum to the fourth quarter,” said Craig Dismuke, an economic strategist at Vining Sparks in Memphis, Tennessee.
Shawn DuBravac, Chief Economist for the Consumer Electronics Association
There is good and bad economic news. The bad news first: economists are now predicting dawdling growth during 2013, with an upswing in the unemployment rate back to over 8 percent for at least the first half of the year.
Yes, there is some good news to assuage the bad: the recovery of the housing industry is heading upwards more quickly than expected and there is a very high likelihood that the economy is not about to fall over a “fiscal cliff.”
The good and the bad and the ugly news was derived from the quarterly survey of the National Association for Business Economists. The poll questioned 44 economists about how they see the economic future of the country.
NABE is an organization composed of business economists and other professionals who use economics in the workplace.
The survey was conducted during the 12 days between September 14 and 26. The best news issuing from the survey concerns the expectation that new housing starts for single-family homes will rise by 23 percent, totaling 750,000 new units for 2012, and a continuing rise in 2013 of about 13 percent, for a total number of units of 850,000.
Home prices are also expected to rise by 1.5 percent in 2012, and 2.8 percent in 2012. This is a higher estimate then the economists gave back in the May survey.
It also seems we are not heading for a fall of a “fiscal cliff.” Despite concerns of the budget deficit and national debt and what the combined $1.2 trillion in spending cuts and tax increases will do to the economy, most economists seem to believe that a giant fiscal explosion will not take place.
‘‘The panelists’ projections for the fiscal cliff are very diverse, though survey respondents in general do not expect the potentially large negative outcomes of the fiscal cliff to materialize,’’ said Shawn DuBravac, chief economist at the Consumer Electronics Association, who analyzed the results for the NABE.
The NRF is Predicting Slower Spending this Holiday Shopping Season
The largest retail trade organization in the world, the National Retail Federation, announced on Tuesday that the economy will most likely see a rise in holiday sales this coming winter of only 4.1 percent, a number reflecting slower growth than what was seen in the past two years.
The prediction states that retail sales in November and December, normally the strongest months for retail shopping, will be approximately $586.1 billion, a rise of 4.1 percent over last year’s sales. Contrast this number with the 5.6 percent increase in sales in 2011, and 5.5 percent in 2010, and you can see why retailers are worried about the future.
To understand the importance of this number, which is one of the most-watched benchmarks for the health of the economy, just consider that holiday sales which take place almost exclusively in November and December make up as much as one-third of annual sales. Combine that with the fact that 70 percent of the US economy is made up of retail sales, and it is easy to see how the NRF forecast and inspire or frighten retailers, economists and investors.
What is holding back consumers this year is lack of confidence. Will legislators agree to turn away from the “fiscal cliff” of across-the-board spending cuts scheduled for January 2, 2013, not to mention tax hikes for everyone, or will the country head straight over the side?
“It’s the uncertainty about where the economy is going, the uncertainty at the federal level about the fiscal cliff, the absence of a path forward from the president and the Congress,” NRF President Matthew Shay commented.
High level talks are scheduled this Tuesday between President Obama and the up and coming leader of China, Vice President Xi Jinping. Xi is hoping that the talks will boost his international standing while he simultaneously tests Obama’s ability to balance diplomacy with China and his election-year pressures.
Xi’s visit has been carefully planned by his Chinese handlers so that it the once-every-ten-year Chinese transfer of power is accepted by Washington and the world as a significant rite of passage. Xi is expected to take the helm of the Communist Party, which leads China, later on in 2012, and then finally taking over the Chinese presidency in March of 2013.
The fifty-eight year old Xi arrived in Washington on Monday and was greeted with a dinner with veterans of US foreign policy, including former national security advisers Brent Scowcroft and Zbigniew Brzezinski. Former Secretary of State Madeleine Albright was also on hand.
Obama has been working on changing US economic policy toward Beijing quietly, trying to find new ways to get results on such touchy issues as improved market access and better currency practices with China which have historically been thorns in the sides of Obama as well as his predecessors.
Xi is the highest ranking Chinese official to visit the US since Obama began his new US leaning toward Asia, began in November. Obama would like to see a more balanced relationship with Asia, reducing China’s increasing assertiveness in the region.
On an otherwise quiet, ordinary street in a suburb of Los Angeles one house seems to have gone crazy. Painted in neon bright colors with several ads is the house of Scott and Beth Hostetler, a couple who are otherwise good neighbors, say their neighbors.
Tacky Look in Exchange for Bucks
Some neighbors were so shocked at the Hostetler’s home’s new look that they even considered calling the police; others were merely angry and confused, but the explanation, given the state of the country’s economy is really quite simple. In exchange for turning their house into a giant billboard the Hostetlers will receive $2,000 per month from the marketing company behind the scheme, Brainiacs From Mars.
Romeo Mendoza, the CEO and founder of Brainiacs explained that his goal is to turn at least 1,000 homes across America into gigantic ads for his marketing firm. For every one of his endeavors he will pay the mortgage, for up to one year.
"If we roll it out to scale and impact the foreclosure crisis, that would be amazing," Mendoza, 42, said.
Overwhelming Repsonse
In April 2011 Mendoza floated his idea on his website. Since that date ten months ago he has gotten 38,000 applications to participate, from even places as far away as Japan and Russia.
Mendoza says he picked the Hostetlers because they are nice people, and he decided to choose the most deserving families, even if their homes are not on the busiest streets. Mendoza checks all relevant zoning laws to be sure advertisements and brightly painted homes do not violate any local codes of law before he puts up his ads.
The majority of applicants are from Nevada, California and Florida, the three states in the US hardest hit by the housing crisis. Mendoza says his idea can help people who are struggling to keep their homes.
"The response has been overwhelming," Mendoza says. "People are hurting, and struggling to stay in their homes. If we can help some of them, that would be great."
Attracting Attention
Mendoza says his plan is to advertise his company’s name and social media marketing tools in front of people’s homes in the hopes of getting the attention of some big companies, who he hopes will hire him based on the originality and quirkiness of his scheme. Brainiacs, says Mendoza is indeed already negotiating with some large companies to run their ad campaigns.
The neighbors however are not happy. One neighbor is willing to put up with the new look of the house for one month, even though the Holstetlers want to keep the ads there for six. Another neighbor, 80-year-old Bob Pancoast, said: "All the neighbors were a little upset at first. We thought they had gone off their rocker. But I guess it's a good idea for them."
"I don't think the program will be a success. It will be akin to graffiti – that's how people are going to look at it. They are going to run into zoning problems everywhere," said housing industry finance expert Charles Mclaughlin.
Mendoza answers:
"There are definitely zoning issues in some cities, and we realize that. But we have really hit a nerve, and we can't let that stop us. Once people start seeing how it works, once they get it, the moment they realize it is paying people's mortgages, they are always on our side, because of this economy."
