Are you able to see some life in the US economy?
Households still struggle in the US, thanks to the onslaught of an unprecedented recession since the Great Depression of the 1930's. People are still facing trouble in repaying their credit card bills. Consumer-lending programs have been extended.
Though manufacturing sector has come out of the slippery ground, if there is no consumer spending, the economy can not have sustainable progress because more than 70% of the US economic activity is startlingly based on consumer spending.
Much work remains to be done to revitalize lending to consumers to fulfill their needs of cars, houses, etc. Fed is closely monitoring and utilizing the resources where they are needed most and in an attempt to carry out the formidable task of inspiring confidence in the minds of consumers, Fed is likely to extend its Term Asset-Backed Securities Loan Facility for newly issued commercial mortgage-based securities till June 2010 . TALF for newly issued asset-backed securities and "legacy" commercial mortgage-backed securities have been extended till March 2010. This move is intended to leverage the strength of commercial property markets that has also witnessed a decline.
Nose-dive in the housing market appears to be leveling off after three years of sliding though consumers are putting off big-home projects.
The major concern of Bond analysts is that, if US Treasuries are dumped by foreign investors, it will trigger spiraling of borrowing costs including mortgage rates.
Data of June asset flows is far from generating optimism. It shows that China, the biggest holder of US Treasuries, trimmed its holdings of US securities by $25 billion in a month. But a single reading is not enough to raise the alarm bell.
Non-payment of debts is still on the rise because of joblessness and employees losing their jobs. On the contrary, industry data show that credit card defaults have stabilized in July, though the big card issuer, Capital One Financial Corp. is facing rising defaults and delinquencies.
A survey conducted by the New York Fed also shows marginal improvement in its employment measure. There is a palpable sense in the circle of economists that the payroll losses of the manufacturing sector are moderating.
But US households are heavily indebted and the lurking fear of losing jobs is looming large. It appears that it is a long and drawn-out process before the big question of when and how consumer spending will revive, is answered.
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