by Bill McBride on 10/16/2005 09:52:00 PM
Sunday, October 16, 2005
UPDATE2: Dr. Thoma provides excerpts and commentary on Krugman's The Big Squeeze
My most recent post is up on Angry Bear, Housing: Ready for the Fall
Real prices for the US housing market almost certainly fell in Q3 2005. Real prices are an excellent leading indicator for nominal prices. In the early '90s housing bust in California, real prices peaked in Q2 1990 and nominal prices in Q1 1991 (according to the OFHEO House Price Index and adjusted by CPI less shelter from the BLS). This is a common pattern for housing busts.
And on the UK 'bust', Joshua sent me this story: High street 'heading for a Christmas Armageddon'
Retailers are facing an "Armageddon" this Christmas, with high street sales at their weakest for two decades, according to one of the industry's most senior analysts.UPDATE: More on the UK: Brown 'ignoring signs of slowdown'
Verdict Research, headed by Richard Hyman, will tomorrow forecast that retail sales in value terms will rise by just 2.1pc in the last three months of 2005, compared with 3.3pc growth a year earlier.
The sluggish growth figures follow a year of weak sales and rising costs. "It's going to be worse than last year and it's worse by a lot," said Mr Hyman.
He described the scenario as "retail Armageddon", adding: "This has been the most difficult and challenging year in modern times, no question about it. And what we are seeing is not cyclical, it is much more fundamental."
Chancellor Gordon Brown has been criticised by a leading think tank for failing to heed warning signs about a slowdown in the UK economy.
The Ernst & Young Item Club said Mr Brown could not blame external events such as high oil prices for the weakening growth rate, which it forecast to be around 1.6% this year, rather than the Treasury's Budget estimate of 3% to 3.5%.
Item's chief economic adviser Professor Peter Spencer said the UK economy was "on increasingly shaky ground" and could not rely on consumer spending and interest rate cuts to bolster growth.
He said: "The Chancellor is blaming the UK economic slowdown on the recent spike in oil prices and the weakness of the European economy, but this is unrealistic.
He added that the UK's problems were home-grown and stemmed from a booming housing market and strong consumer spending, which has propped up the UK economy until now.
He added: "The prospects for the business sector are still excellent and we have assumed a modest rise in exports and investment next year that would allow interest rates to remain on hold. However, if business fails to respond rates will be cut again in the New Year."