"Stocks Slump On Slowdown Fears" Quarterly Report

CNN recently reported that the second quarter gross domestic product report due early Friday will show that estimations of growth will not be met. Various factors contribute to this new expectation, including a drop in the Dow Jones industrial average, a drop in home sales, and the looming fact that the US dollar has again fallen to the Euro as well as other comparable nations. However there were references to a low filing of first-time unemployment insurance claims, yet nothing else seemed too encouraging or reassuring for the economy. Reading this report I was curious as to how much a small shift in GDP from quarter to quarter actually effects the economy as a whole and how well it can predict what the next quarter will do--this being evidenced by the notion that originally estimated growth in GDP will likely not occur. Also, how does a quarterly reading of GDP compare to what will happen in a full calender year?

Current Recession Affects Choice of Economic Indicators

Lab experiments in the field of economics are clearly an impossibility. Thus, economic tools and theories are largely tested solely during dramatic macroeconomic events. The current "Great Recession" is no different. Our understanding of various tools and measurements has changed substantially. Thus, we use different indicators to either give us hope or paint a grimmer portrait during the Great Recession than we did during the Great Depression. Notable changes include a strong preference for using the Institute of Supply Management's manufacturing index, credit spreads, and employment data as indicators. ISM's manufacturing index "quizzes manufacturers on new orders, production, employment, and inventories, among other topics" and has a favorable record in predicting growth and employment. Credit spreads are likely popular in large part because of the role credit played in creating the current crisis. This particular indicator depicts the level of trust between players in the credit industry. Employment data is naturally vital as it plays a large role in the health of the economy. Alternatively, raw commodity prices have fallen out of favor with the economic community. They failed quite noticeably as predictors in the previous cycle, leading many economists in 2008 yo deny the recession because commodity prices were still high. Housing data is also less popular as it is clear that previous favorable signs in housing pointed not to strong economic performance but a bubble that was about to burst. More established macroeconomic indicators such as GDP or the yield curve are still held in high regard and likely always will be, but the current recession has refined our understanding of more subtle indicators.

Ford to Unveil 8 New Vehicles in India

With the increasing demand in the fast-expanding car market, Ford Motor Co. said it is going to introduce eight new vehicles in India by 2015. Mr. Hinrichs, president of Ford Asia Pacific and Africa, said industry sales in Asia Pacific and Africa will more than double to about 35 million vehicles by 2018, up from 16 million units in 2009. He also said that vehicle sales in India have grown at an average annual rate of 17% over the past five years, and that as many as 10 million to 11 million people will no longer use scooters and motorcycles and instead use small cars. While there is slower growth in the markets of the U.S. and Europe, it is a great idea for Ford Motor Co. to capitalize on the rising auto market in countries like India, and as well as in other countries like China and Brazil.

CBO Says Stimulus May Have Added 3.3 Million Jobs

According to The Washington Post, the Congressional Budget Office Report released Aug. 24, 2010, said that President Obama’s economic stimulus package added about 3.3 million jobs to the economy during the second quarter. The CBO further states that the stimulus money may be the primary reason for the GDP growth, which also occurred during the second quarter. Polls show that the public is skeptical of the stimulus money and its ability to help our economy in the long run. I agree with this skepticism and also wonder if the long-term negative effects of an increased national debt will outweigh the benefits of short-term relief from the stimulus plan. Expect to see republican slander directed at President Obama’s stimulus plan as republicans attempt to seize control of congress through November’s midterm elections.

Housing market dwindeling in July

The government released a report Wednesday that showed an unfortunate decrease in the housing market, specifically in reference to new home sales in July. The Commerce Department has found that new homes purchases in July of this year were 32.4% lower than in 09' . The author said that this drop was not unexpected and in fact, Analysts surveyed by Thomson Reuters had expected that sales of new homes would be nearly non-existent in the months of June and July. A large portion of this drop can be accounted for by the fact that July was the first month that new homeowners no longer qualified for a tax credit of up to $8,000 when they purchased a new home. It would seem that many people in today's economy are simply staying in their existing homes and cherishing them as their only true strong asset. This theory is supported by a recent report by the Mortgage Bankers Association which showed that home refinancing loans accounted for 82.4% of the total application last year.