US housing starts is going through a bad patch

New US housing construction plunged sharply and more than expected in March, reversing a big jump from the previous month. The hopes were tempered and the effect is: the housing market stability is on the horizon.

The Commerce Department said Thursday that the construction of new homes and apartments dropped 10.8 percent last month to an adjusted annual rate of 510,000 units. The cause of the decline is due to a decrease in construction of multi-family homes. But there is also good news: the single-family activity may finally by stabilizing.

Some figures: the drop in construction in March followed a 17.2 percent surge in February, which was an unexpected gain. The 510,000 unit pace for total construction is one of the lowest in government records dating to January 1959. The record low was a 488,000 unit pace set in January.

The US economist at Capital Economics said even if the housing activity has turned the corner, it is still very weak. In spite of the disappointing results The National Association of Home Builders reported Wednesday that its gauge of builder sentiment posted its biggest one-month jump in five years in April. The US housing market has been badly hit as the credit crisis has made obtaining a mortgage even more expensive. Moreover the number of US workers filing new claims for jobless benefits fell last week, but so-called continued claims rose to a fresh record as the recession bit.

According to me, the housing market suffers severely from the financial crisis. The impact is considerable, so the government has to tackle the problem by drawing up a plan and lending financial support. Furthermore the consumers are put off by this crisis, but actually their behaviour has to be the same like before the crisis, so there is not an arrest of growth.

Written by Marie Maes

Source: The Financial Times
Article: US housing starts fall 10.8% in March
Published: April 16, 2009
By Alan Rappeport in New York

Podcast 2

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The American Economy team out!

Microsoft suffers first sales dip

For the first time in 23 years, Microsoft has announced a quarterly sales drop of 6% comparing to the previous year. Most of its profit is made by selling its operating system Windows and its business software, like Microsoft Office. The sales drop resulted from a fall of sales of personal computers bought by consumers and businesses.

According to Steve Ballmer, Microsoft’s chief executive, the bad news is a result of the downturn in the world economy. They expect the weakness will last at least till the end of the next quarter. The situation is worse than analysts had been expecting. It looks like the demand and consumer preference had reached their maximum. But there are also positive elements, Microsoft is controlling costs and getting that under control.

To solve this issue, Microsoft has cost-cutting plans. Last January, Microsoft announced a disappearance of 5,000 jobs over the following 18 months.

Businesses all over the world are suffering from the financial crisis. So it’s quite normal, Microsoft is also having problems. According to me, the situation is not very alarming. In times of a bad economic market, sales figures are falling in all areas.
The job losses are more alarming. Certainly in countries with a bad system of social security. A lot of families will have problems.

Source: http://news.bbc.co.uk/2/hi/business/8015623.stm

Ford loses $1.4 billion

Ford company announced this week a lower than expected loss for the first quarter in 2009. Also the company announced that it remains on track to meet its financial targets despite the worst quarter for the car constructors since 25 years.

Ford is the only car constructing company in the U.S. that didn’t receive loans from the government to help avoid bankruptcy, but this quarter it made net losses of $ 1.4 billion. There is not only the loss of $ 1.4 billion, but also the revenue dropped with 37% to $ 24.8 billion in the this quarter. Ford is already making losses since 2005, what brings the total losses just under $ 40 billion. Unless the bad results Ford is doing better than expected, Wall Street was expecting a revenue of only $ 22 billion. It’s also doing better than its two U.S.-based rivals.

Based on what Ford said in its statement that it still does not intend to ask for federal aid, it’s also going to restructure its debt and make changes in its labor contract with the United Auto Workers union.

According to me the financial crisis keeps making victims in the car industry and all the other sectors. At this moment buying a car is not the priority for the most people so the car industry is collapsing. It’s important that the government keeps supporting G.M., Ford and Chrysler because otherwise the damage will be disastrous not only for the economy but also the unemployment rate will raise again.

Source:http://money.cnn.com/2009/04/24/news/companies/ford_results/index.htm?postversion=2009042408

Obama to lean on credit card CEOs

Finally the measures to protect consumers against the credit card market might be legalized. Years ago, the measures have been introduced but there was no legislation yet. On April 21, Barack Obama announced that there will be a meeting of administration officials of the congress and card company executives on Thursday. This could finally be the break-through where a lot of people have been waiting for.

The measures are there to protect the consumer. A system of bills would be used and these would be responsible for banning card companies who ask ridiculous high interest rates and fees. It would also prevent young adults from getting credit cards and run up debts. Now more than ever credits cards are having bad influences on consumers’ wallets. In February the amount of money credit card companies can’t collect from their customers reached a new peak; it’s never been this high during the last 20 years.

Though there are a lot of people who are against these measures. Banking lobbyists warn us that these new and tougher rules could make credit card lending more costly. This could slow down the recovery of the credit markets that are undergoing hard times. During the 2008 elections, the credit card sector gave about $7.3 million to lawmakers in both political parties. The company Visa spent $1.7 million on lobbying according to the government lobbying registries.

I really hope that these measures will be legalized. It’s unbelievable how much interest some of the companies ask. A lot of normal people just don’t know how easy it is to run up debts and are likely to spend more money than they can actually have. I also find that young adults shouldn’t be able to get their hands on a credit card; they don’t know the value of money yet and it’s really dangerous for them also to build up debts.

I can conclude that the credit card market needs governmental guidance for the safety of the average consumer.

Source: http://money.cnn.com/2009/04/21/news/economy/credit_card_crackdown/index.htm?postversion=2009042115

663,000 jobs lost in March

Three months into the year, the unemployment rate has already soared to 8.5 percent. The official figures showed that it was the highest level in more than a quarter-century, as the recession savaged the labour force.

The non-farm payrolls data presents that about 663,000 jobs disappeared from the American economy last month. Moreover between January and March, more than two million jobs were lost, according to the employment report, released Friday. So in all, the total number of layoffs swelled beyond five million jobs.

The job losses weren’t large and widespread across the services sectors, that is in contrast with the improvement in the manufacturing activity. The government expects and hopes the world economy stabilizes in the second half of the year, before the market recovers. So the government’s purpose to the downturn is being put to a strenuous test. Further president Barack Obama requested the US and the developing countries to spend more as part of a global rebalancing of demand in the years ahead.

Ben Bernanke communicated the purchases of government securities and debt were having beneficial effect, which is positive. We can conclude the decline in full-time jobs is very worse, there is a loss of 1,188,000 jobs but in spite of this there is an increase of 373,000 in people working part-time.

According to me, unemployment is something that is related to the economy. Especially in these hard times companies purpose is: continuing their activity. People haven’t enough time anymore in these outpaced society, and so part-time jobs grow in significance. The government has to recover the economy by supporting the market financially.

Written by Marie Maes

Source: The Financial Times
Article: US unemployment hits 8.5%
Published: April 3, 2009
By Krishna Guha in Washington

As Economy Is Down, Vitamin Sales Are Up

“As Economy Is Down, Vitamin Sales Are Up” was the first title that really caught my eye.
I did not know what to make of it so I decided to clear it out.

The article tells us how people like Ms. Parham are skipping a (necessary) doctor visit due to the financial crisis or due to the loss of their job in order to make some savings.
Ms. Parham said she spent $50 a month on prescriptions for her asthma, allergies and other chronic problems. Now, she pays $6 a month for over-the-counter protein supplements and oregano oil capsules. Nothing to worry about according to you? I see it differently.

All right, it can be that those protein supplements are helping for her allergies and maybe for her asthma and even for her chronic problems, but I think it is very difficult to know where to draw the line here. Like I said, there is no problem when it helps for allergies and so on, but I fear she will take simply more supplements if those supplements do not help anymore in the near future.
There is even a distinct possibility that some people will become their own ‘doctors’ over time wich will cause only more bigger problems.
So I am convinced that those proteins can not be a substitute for traditional health care.

But a lot of consumers seem to be doing the same math as Ms. Parham.
Sales of vitamins and nutritional supplements have grown consistently for years and doctors are warning for the problems on long-term.
Others are even replacing fresh fruits and vegetables with fish oil capsules and antioxidant supplements. This is just too crazy.

Source: http://www.nytimes.com/2009/04/05/business/05vitamins.html?_r=1&ref=us