by Bill McBride on 2/17/2009 09:04:00 PM
Tuesday, February 17, 2009
From the WaPo: Economy Strains Under Weight of Unsold Items
The unsold cars and trucks piling up at dealerships and assembly lines as consumers cut back and auto companies scramble for federal aid are just one sign of a major problem hurting the economy and only likely to get worse.And a quote from my friend blogger Mish:
The world is suddenly awash in almost everything: flat-panel televisions, bulldozers, Barbie dolls, strip malls, Burberry stores. ... Business everywhere are scrambling to bring supply in line with demand.
Some analysts say over-capacity is so rampant that it will stymie government efforts to unfreeze credit markets. Banks have little reason to lend not only because they still have bad debt on their books but also because businesses don't have a pressing need to expand, said Mike Shedlock, an investment analyst with Seattle-based Sitka Pacific who writes the popular blog Mish's Global Economic Trend Analysis.Is Mish an expert on nail salons? (just kidding of course)
"What is it that we need more of?" Shedlock said. "Do we need more Wal-Marts, more Pizza Huts, more nail salons?"
And on the oversupply in housing:
Harvard economist Edward Glaeser estimates that from 2002 to 2007, the country's housing stock increased by 8.65 million units, outpacing the number of new households, which increased only by 6.7 million over the same period. Taking into account a rise in the number of vacation homes, Glaeser estimates an overhang of about 1.3 million vacant units. Absorbing that excess, he said, could take an additional two years.I think that number is a little low, and I'd put the excess housing units in the 1.5 to 2.0 million range.
Note: Housing starts for January will be released tomorrow (Feb 18th).
Posted by Bill McBride on 2/17/2009 09:04:00 PM