Wednesday, August 17, 2011

A little economic reality by David Rosenberg: Commercial Real Estate, Europe, Asia, Layoffs etc...

"Challenger layoffs have surged 80% in the past three months.

That will lead to higher jobless claims in the near-term.

Consumer buying intentions for big-ticket items has sagged to recession levels.

Productivity has declined for two straight quarters and actually,
unless companies wilfully want their margins to implode,
will soon respond by shedding labour input.

...Every dollar of balance sheet expansion at the Fed and the Treasury
since the beginning of 2009 has generated 80 cents of incremental GDP gains.

Not only is that a pitiful multiplier but now that there is no more stimulus,
it is a legitimate question as to how an economy
that only operated on policy steroids for the past two-and-change years is going to perform.

...The withdrawal of stimulus is feeling like a policy tightening.

...The data on a three-month basis are following a classic pre-recession pattern

...The economy can hardly grow without credit
unless it receives ongoing doses of government support,
which for now is no longer forthcoming.

...The imbalances in housing and debt were not fully resolved in the last recession...

...In a vivid sign that housing is no longer responsive to interest rates;
mortgage applications for new purchases cratered 10.1% in the August 12th week.

They have declined now for three of the past four weeks
and are at the lowest level since July 2010.

...The U.S. consumer is on a debt-reduction plan...

...Core Europe is stagnating and the Asian economy is cooling off.

The Q2 contraction in Hong Kong GDP was the canary in the coal mine;
Chinese industrial production contracted 0.4% MoM July as well.

...This bodes ill for the U.S. export sector.

Also take note that the sharp slowing in core Europe
is spreading through the entire continent...

...if you're looking for the next shoe to drop,
it may very well be in U.S. commercial real estate.

...institutional investors are starting to back away
from what appears to be an oversupplied and overpriced commercial property market
in several major cities..."


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