December 21, 2012
More Sound bites from the National Association of Realtors Conference – Outlook for the Global Economy – Adrian Cooper, Oxford Economics
- GDP roller coaster ride. G7’s slow, emerging markets better but slowing. Eurozone consumer confidence is sharply down.
- Uncertainty over fiscal cliff is holding back growth.
- Eurozone in a vicious fiscal spiral. Fiscal tightening in some areas up to 8% of GDP in 2011-2013. Causing a sharp slowdown in world trade. Not only governmental austerity but private as well.
- U.S. financial sector debt much lower since 2008. Banks are back to 2001 levels. In Europe, debt level is staying at very high levels including banks.
- Who has cash? Most companies around the world have cash but are holding it due to uncertainty.
- High commodity prices are squeezing spending power. All combine to create a pretty subdued picture.
- European GDP is falling. Here, the Fed’s foot is fully on the throttle. Household debt service is close to record lows. Home prices are back at fair value. Real estate activity is starting to strengthen. There is a decline of unsold inventory.
- Prospects for U.S. – 2 high points: U.S. manufacturing is now very competitive because unit wages have not increased in a decade, at its best in 30 years and is boosting trade and investment. The energy section is booming with shale production.
- What could go wrong? Domestic politics and the fiscal cliff. 5% of national income lost overnight. Americans have the reputation for doing things faster …
- Eurozone has extremely high unemployment rate. Unit labor costs are high. Will there be a Eurozone crisis (break-up)? Economic cost would be enormous. World recession. Not just Greece would suffer. Example of disparity between Greek expectations/retirement and that of Germany.
- Worry that China could face a hard landing.
- Emerging markets worldwide have a rising middle class and will increasingly drive global growth. Will drive demand for retail and office space.