Home Buddies – Home Ownership Coach – Houston, Texas

Quarterly Economic Report Part 2, H.R. 6867, H.R. 1424

Part Two (Part One)

Last week we took a look at the recession and what it would take to get on the road to economic recovery.  In addition, we considered what risk could prevent the US economy from recovering sooner rather than later.  This week we will take a look at how long it could be before economic growth returns to our economy as well as talk about inflation and interest rates.

Economic Growth

As I discussed last week the economy slipped into a recession last year.  It is expected that the economy will continue to decline as we go into the first quarter of 2009.  It appears that economic growth more than likely will not enter back into the picture until late in 2009.

H.R.6867

Perhaps one of the biggest indicators that our government is concerned about our economy was the passing of H.R.6867 “The Emergency Unemployment Compensation Act of 2008” on November 21st.   This bill provides another seven weeks of unemployment benefits for those whose benefits have run out but they have yet to find a job.

Inflation

Many people were fearful that there were inflation pressures moving up within our economy.  However, as I discussed in previous articles, these assumptions were based on oil and food, which the Federal Reserve (the fed) does not figure into their “core inflation” calculation.  Now we understand why…because food and oil are too volatile to figure into the inflation picture.  This has been proven as inflationary pressures have all but disappeared.  Now the worry warts are talking about deflation (i.e. persistent decrease in the general price level) which I do not see any evidence of this type of scenario unfolding over the next year.

Interest Rates

Earlier this year many felt the fed would no longer cut interest rates; however, with the credit crisis and faltering financial institutions, the fed was forced to aggressively cut the target federal funds rate to 1.00%.  With the economy struggling and with the uncertainty in markets I feel there is still the possibility that the federal reserve will cut rates another half point later this year and/or early next year.

On Tap for Next Week

Next week I will take all of the current information and projections for next year’s economy and provide investors, and real estate professionals with some sound recommendations for the coming year.

Cliff Pape
Home Buddies