The economic outlook for June is not looking as promising as last months. Consumer spending took a huge beating in late April and May with figures showing losses of single digits. The housing market on the other hand continues to do well with sales up single digits as well. Unemployment will cross the 9% rate as General Motors announced it Chapter 11 bankruptcy and the world will continue to go round and round.
So what does it all mean for June? As discussed earlier, the economy is highly influenced by the perception and confidence of the public and will shift only when people regain confidence that this recession will end soon enough. May was a good month as the new laws of credit cards changed, and the stress test revealed some new findings that will help boost confidence back.
The housing market and unemployment remain the big issue in this economy, Main Street has negative equity on their homes and unemployment keeps rising because of large companies going out of business. The real turn around will be Obama coming up with a solid plan on how to get the existing home owners that have been responsible into better loans as their arms are coming due. A solid plan around helping the right people on Main Street would help the president’s ranking as well as the confidence of the public. Such plan will have to be released prior to fall and be in full effect if we plan to see a recovery by late 2009, which I still remain confident that we will see.
The housing market on the sales side is doing well, new and used home sales are up and shorts sales are moving faster, creating fewer inventories and allowing some builders to restart the building process, meaning more jobs for some. This coupled with the innovative plan Obama has around “green” natural energy sources should help keep unemployment leveled till 2010. I still stand behind my forecast that we will not see a significant improvement in unemployment in 2009 but rather mid 2010.
Energy prices going up steadily in May and continuing to climb in June so far, I do not see anything alarming here. We are simply going back to the normal figures of $3.00 for a gallon of premium. This goes back to my previous outlook of inflation and its effects and dangers after a recession. Be careful as inflation can become very tricky if you are not prepared and comes in very strong after a strong recession like the one we are in.
For June, I think we will see a decrease in consumer spending again simply due to it being vacation month and people spending abroad, but will continue to see an increase in home sales. Unemployment will remain steady and expect crude oil prices to rise some more until late July. We will be keeping an eye on Korea and Iran which will play into our economic forecast for later in the year. Another attack or war could lead to a disaster for the financial sector and an increase in the defense budget that was recently cut .
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December 24th, 2009 at 7:16 am
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