Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Consumer confidence is tumbling - economic growth will likely slow during 2nd Quarter
In March, consumer confidence tumbled to 67.5% from 77.5% in February. Before the New Depression hit in late 2007 consumer confidence was in the 90s. Then consumer confidence fell, hitting a 28 year low in November 2008 at 55.3%.
On Friday, the BEA released its final revision for GDP during the fourth quarter of 2010. The rise in GDP during that quarter was led by increased consumption demand and improved net exports. The following table shows the components of aggregate demand and their contributions to GDP growth during each of the four quarters of 2010:
During the second and third quarters of 2010, the United States would have grown robustly if a worsening trade balance hadn't slowed economic growth. During the second quarter, deteriorating trade subtacted 3.37% from economic growth and during the third quarter it subtracted 1.70% from economic growth.
But during the fourth quarter of 2010, Ben Bernanke at the Federal Reserve began a massive purchase of U.S. government bonds (QE2). This had two effects:
It is clear from the consumer confidence figures for March 2011 that Household Consumption is not going to continue driving economic growth. The question is: will QE2 continue to improve net exports? I do not think so:
In short, I expect U.S. economic growth to slow during the second quarter of 2011. The United States economy is not yet out of the New Depression.
Real Estate Taxation
Journal of Economic Literature:
Atlantic Economic Journal: