Mixed Economic Signals - What’s New?

Below are posted some thoughts about near to medium term economic conditions pertaining to the U.S. On the one hand, a top Citibank official forecasts declining home prices through 2009 in the U.S and England. On the other, (what else would you expect?) investor/economist John Mauldin points out that there are some reasons to be optimistic.

Also in the optimistic mode, I noticed a piece of news last week that seemed like a straw in the wind. A Wisconsin maker of cranes has begun to ramp up production, calling 75 employees back to work. True, it is only a small company. But it just strikes me as a very good sign.

I would also note, as have others, that a consequence of very high energy prices will be a new tendency to reverse the globalization and just-in-time manufacturing trends that rely on shipping goods long distances and often very rapidly. That would be very good for the U.S. manufacturing sector. We may already be seeing signs of it happening.

The ability of the U.S. and more generally the OECD economies to rebound during the next 18 months will be very important if, as I suspect, global oil supplies begin to tighten much further starting around 2010 and become increasingly tight through at least 2015.

That is likely to be the start of a period of substantial pressure on all economies other than oil exporters. If the U.S. and OECD are still weak in 2010 from the current housing and credit problems, it will be that much more difficult for them to deal with a new oil supply crunch starting in a couple of years.

Here are the experts:

From economist John Mauldin:

Goldman Sachs estimates about 70 million people a year worldwide are entering the “middle class”

Pointing out other optimistic economic trends, Maulden pointed out that manufacturing in the US is starting to make a comeback, with the lower dollar and management driven to compete globally.

House prices could fall for two years: Citigroup

Sat Jul 19, 4:11 AM ET

LONDON (Reuters) - Citigroup chairman Win Bischoff has warned that house prices in Britain and the United States are likely to keep falling for another two years.

The chairman of one of the world’s most powerful banks told the BBC in an interview that he expects it will take two years for the markets to stabilise.

He also said he expected the credit crunch could continue through until 2009.

Bischoff told the BBC that there would be redundancies at the bank, which employs 12,000 people in Britain, and warned that some of them would be compulsory.

No further details were released of the interview which is due to be broadcast later on Saturday on the BBC News Channel

Posted in Categories: Contributor, Economy, External Research, UK, USA.

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