Houston, We Have A Problem…
07th December 2009
At the moment I am sitting in Houston Texas where they have just experienced something extremely unusual, a snowstorm. There were alot of very excited people yesterday taking pictures and the TV dubbed it “Blizzard 2009″ with almost blanket coverage. Today, though things have calmed down and I have been trying to make sense of what the rest of the news is all about.
Talk on the economy has really been dwarfed this week by, of all things, and as our waitress this morning so eloquently put it, by Tiger bloody Woods. Seriously, it is wall to wall coverage now the blizzard is done.
USA Today had an interesting article that 30 year fixed mortgage rates had fallen to their lowest rate for ages which is starting to kick start re-financing, although several commentators are still to be convinced about this.
There does seem to be a view, in the coverage I have seen at least, that whilst the worst is over for now, more issues are to come especially when talking about how to wean everyone off the “financial stimulus”.
Unemployment is still high here but recent jobs figures suggest this has eased, albeit slightly, down to 10%. On top of this the average working week in terms of hours worked increased by the biggest margin in 3 years, showing that those firms who cut down capacity are starting to increase hours again, in turn boosting wage packets.
Another boost was that the number of temporary workers increased by the largest amount in 5 years, which can be seen as a precursor to firms taking on permanent employees once more. Inventories at U.S. factories also increased for the first time in more than a year in October, while factory orders also rose an unexpected 0.6%.
However, bank closures are still going on here, with another 5 being shut today which brings the total in 2009 alone to 130 banks that have been forced to close. Meanwhile individual states in the US are already raising taxes in order to fight budget shortfalls.
What really strikes me is just how politicised everything is over here, much more so than in the UK, and there are many who question every single stat and put their own spin on it to the nth degree.
In the UK we often look across the pond as a sign of what is to come in the short to medium term, and the news from what I can see is we all need a huge slice of realism. Whereas the next few months may represent a welcome lull and some definite silver linings and opportunity there is still an awful lot of pain to go through which may not show itself until the latter part of next year.
The good news is that for many smaller firms in the US, they have proved more robust than many feared and are starting to adapt to the new world and try to take advantage of the opportunities.
Back in good old Blighty I see a similar pattern emerging, and one that has no doubt been repeated in the immediate aftermath of every financial downturn. Newer, small/medium companies will take the opportunity whilst larger, more unresponsive companies will struggle to change in time, partly through arrogance, partly through their treatment of their staff, and partly through difficulties in cutting and manoeuvring that size brings.
The property market is slowly beginning to recover in the US, and in the UK I expect this recovery to be slightly quicker, simply due to supply and demand, especially in London and other areas of greater demand.
Whilst we do have a long way to go, the signs are there that if the move away from the stimulus packages around the world are handled correctly and sensitively things will slowly recover without too many serious glitches. If Governments handle this transition poorly, and there is a great deal of pressure on the next incumbents’ to Downing Street, they may be reaching for the red phone to say not Houston, but Washington, we have a problem.
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Andrew Montlake, Director and Spokesperson for Coreco, gives his honest and forthright views on the mortgage market, economy and all things property related. Monty was voted "Mortgage Personality of the year 2008", "Best Press Spokesperson" in 2011 and is the current holder of the British Mortgage Awards “Best Marketeer” title. Expect expert analysis, delivered in a down to earth style with a side helping of exuberance.