“The U.S. economy grew in the third quarter for the first time in more than a year, propelled by stimulus-driven gains in consumer spending and home building.”
UPDATE (10/30): “Americans cut spending for the first time in five months and a gauge of confidence weakened, signaling consumers will make a limited contribution to the recovery without government incentives.”
Economy in U.S. Expands for First Time in a Year [Bloomberg]
“Credits For Condos” (And Other New Homes) A Clunker As Well? [SocketSite]
From ‘Sticky’ To ‘Slippery’: A Fundamental Change In The Housing Market? [SocketSite]
U.S. Economy: Consumer Spending, Confidence Fall [Bloomberg]

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Comments from “Plugged-In” Readers

  1. Posted by Joseph

    with 10% unemployment – no way! the uptick is a misguided and giving a false sense of security. It is soley due to the hosuing credit opportunities and low interest rates….

  2. Posted by bird_man

    if everything continues to be on sale, yes. otherwise no.
    Agreed with Joesph. Perception vs reality.

  3. Posted by scurvy

    In a word, no.
    In many words: we will continue to slide back down for a few years until we elect a new president. Not that I think Obama is doing a bad job, but a lot of this stuff is perception and we’ve got one hell of a hangover to sleep off. Voters will just want “change.”

  4. Posted by anonn

    I don’t know. We’ll see what the government does and whether jobs come back during the time that housing remains buoyed. But if Socketsite is any sort of a barometer the gloomsday crowd of last year has gone silent and missing over the past few months. Months that have corresponded with housing improvement.

  5. Posted by Trip

    The unprecedented sums of money the govt is shoveling into the system have stopped the hemorrhaging and (almost) stabilized the patient. That is very good news. But unemployment is still very bad, and no improvement is on the near-term horizon. More critically, the now-zombified banking system remains insolvent and consumer, commercial real estate, and residential real estate losses will continue to grow in that sector. So banks are not lending — they are pulling credit from the system. And consumer spending, the lifeblood of the economy, is not likely to improve markedly any time soon because most consumers have little money but have lots of debt they need to reduce, and those that do have money are in principal-protection mode. We’re in for a long slog. Not being at death’s door any longer is a far cry from being healthy.
    Still, it is quite a relief to be able to put justified fears of total collapse to rest.

  6. Posted by tipster

    Some of the businesses I run are usually ahead of the economy. They turn down first and turn back up first. One of those businesses has turned slightly up, but is nowhere near normal- it went from about 30% of normal to 35% of normal. The others are still way down.
    One of the problems is that the companies still selling in volumes are doing so at much lower price points. I walked through a grocery store the other day and the prices shocked me: they are way down, probably at or near the sellers’ costs including distribution. Bread that had been selling for $4.69 per loaf can be had for $1.99 per loaf. What this means is that the company selling it either goes out of business, or they squeeze their own suppliers dry.
    If you have the power to squeeze your suppliers, you are still making money, though less of it than before. If you don’t, you are probably losing money to compete. We’ve resisted the squeeze by the people to whom we supply, but that means much less volume, and that means less of a chance to spread out our fixed costs, so our costs are effectively going up.
    Se we’re squeezing our own suppliers to try to make it up. We already cut our salaries, and raises this year are out of the question. We’re debt free and so we can outlast this, but we’d be in a world of hurt if we were not. Instead, my take home is about half of what it was last year.
    If that’s an encouraging sign, take it. Business isn’t zero, but our customers are still closing up shop almost daily, and it’s usually because their own customers are doing the same. The economy may be expanding, but we’re not seeing it very broadly based. At least not in Silicon Vally, where most of our customers are located.
    The only good thing about being a business owner right now is that the businesses that usually lead the economy turned way down in September of 2007, and so that was why I was able to bail out of the market entirely by the end of 2007. I didn’t lose anything in the market, but my annual income is down so far that I’m still taking quite a hit. The headline firms may have stopped collapsing, but the small companies I work with are still failing.

  7. Posted by anonn

    Bread that had been selling for $4.69 per loaf can be had for $1.99 per loaf.
    Bread that you saw selling for $4.69 in a corner bodega can be had in a supermarket for $1.99? Unsurprising.

  8. Posted by EBGuy

    This is open to annon or anyone else, besides gold and oil (and north slope Bernal listings), name one item selling for more this year than last.

  9. Posted by anonn

    No thanks. How about you name any bread selling for 60% off?

  10. Posted by scurvy

    EBGuy, Goldman Sachs’ stock.

  11. Posted by tipster

    “Bread that you saw selling for $4.69 in a corner bodega can be had in a supermarket for $1.99? Unsurprising.”
    Nope. It was Oroweat whole wheat bread. The regular price at Safeway is $4.69, and last year it would go on sale for $3.69-3.99. $1.99 was pretty much unheard of. Head in to a grocery store and look around. The prices will surprise you. Lucky had bags of pasta for $0.33 last weekend. No one can make a profit at that price and even the competitors of the companies that are selling it are getting killed.
    Last week, I bought a year’s supply of copy paper and envelopes for 50% off what we paid all last year. That’s my point: the sales that drive the economy blipped up, but only because pricing is so aggressive. We didn’t buy all that paper because we needed it, we have a month’s supply, we bought it because they were giving it away. We’re using less than half the paper we used last year but I bought 6 times or regular order. Does that mean the economy is improving?

  12. Posted by JustLooking

    The S&P 500 Index.
    Closed today at 1066.
    Closed 10/29/08 at 930.

  13. Posted by down the drain

    1 EUR = 1.28 USD
    1 EUR = 1.48 USD

  14. Posted by corntrollio

    Good news that at least some of the Fed purchases used to prop housing prices up has stopped, although they’re still plenty of propping up of housing prices going on through other programs:

  15. Posted by EBGuy

    Wise guys. I think some folks are missing my point. Guess what, 401k contribution limits will not increase for the 2010 tax year. Welcome to deflation nation; get used to it.

  16. Posted by dub dub

    One stimulus program ends, another begins. I believe they can drag this out for many years, no problem.
    I’m waiting for the 2010 small-business bailout with next year’s ~10% GDP deficit. I can’t wait to see what they have planned!
    Midterm elections next year should make the handouts particularly awesome.

  17. Posted by JustLooking

    Don’t hate the player, hate the fact that we missed the retorical nature of your question. Or did we know it was retorical and pile on anyway?
    That said, almost everything is still well below the values seen in Spring/Summer 2008:
    S&P 500: Peak of 1,426 in May 2008
    Euro: Peaked at 1.59 in July
    Goldman: $200 in May 2008
    Hey! From this vantagepoint, everything is still cheap!!

  18. Posted by anon

    Alot of people are just not getting the fact that housing will continue to be propped up until it stabilizes and starts moving up, however long that will take, and no matter what the cost.
    Unemployment will start decreasing within the next six months, maybe less. The worldwide economy is expanding, trade is increasing…

  19. Posted by anotheranon

    Next quarter, I would expect a further improvement in the finance sector, driven by Wall Street’s annual shearing o’ the sheep.

  20. Posted by tipster

    How’s that theory working out for people who bought in Florida, Nevada Arizona, Stockton, Inland Empire, Detroit, etc…

  21. Posted by dogboy

    Until the most recent baby boom (18-22 year olds) start getting married, having kids and buying homes, real estate will continue to suffer.
    Of course they need to find jobs first and since the original boomers have stopped spending, that could be tricky.

  22. Posted by fred

    >name one item selling for more this year than last.
    College education and health care are both up substantially. The present value of future state and federal pensions, which you are paying for via your taxes, is also up. Those taxes may be deferred for the moment, but unless you are planning to die soon, then by accrual accounting theory you should make a debit now. Military spending, which you are also paying for, is up. Again, your taxes may be down for the moment, but eventually the bill will come due, and with interest, so you should account for that today. If you are one of those wretches you has credit card debt, then your interest rate is likely up. Cost of traveling to Europe is up again, (exclusive of oil prices raising airfares) due to the decline of the dollar, as are many imports from Europe.
    In short, goods and services exposed to competitive pressures are getting cheaper while services which involve government interference in the market (education, healthcare, government itself) are getting more expensive and this trend is not likely to change anytime soon. The decline of the dollar versus the euro, on the other hand, is probably reached its limit.

  23. Posted by Usually Named

    Welcome to market-driven pricing. It’s just capitalism doing its thing.
    The question is are we in deflation or inflation? Given the debasing of our currency by the Fed and our government, I’d say we’re more likely to inflate (and $80 oil says so too).
    Welcome to Carterland. I hope you will enjoy your ride to Stagflation again soon.

  24. Posted by tipster

    Careful. U.N. $80 oil can be the result of the government pumping money into investment banks, who see no good prospects to lend it, and instead send it to people who speculate with it in the stock and commodities markets.

  25. Posted by EBGuy

    Fred, Thanks for your comments (see I wasn’t just being rhetorical). I’m still waiting for “other shoes to drop” before we clear out of this mess. I think one or two more years of this and we’ll start to address the government pension problem; we’ve already started on salaries at a state level (see furloughs). The big one to go will be the EIC (entertainment industrial complex). On the sports side of things, the cracks are starting to appear (NBA refs, Cincinnati Bengals unable to sell out despite being in first place). Is is just me, or are more entertainers starting to divest themselves of extra homes. Kids these days listen to their $@!$# compressed music on $@!$# earbuds and don’t get me started on YouTube (five star ratings on $@!$# videos with $@!$# sound). The revolution will not be televised. Higher education is on a similar track with support staff taking an early hit. I was just reading a link on the internets (CR, I think) about a school that got more applications after raising their tuition to the astronomic levels of comparative schools. When they were cheaper, people didn’t believe they were getting a quality product — plenty to cut there (no shortage of academics, right?)

  26. Posted by Trip

    Yes, good thoughts fred. I see that CIT is about to file bankruptcy. More credit tightening from that. And the stock run-up looks to have ended imho (for the record, I pulled out about 80% of my equities a little over a month ago — a few weeks too early). We still have a lot of headache to nurse before our very bad hangover is over. To paraphrase Churchill, we may be at the end of the beginning (which is great), but we’re not yet at the end, or even the beginning of the end. My two cents is that the gubmint will keep the spigot open but it’s going to be more directed toward job creation and less at the housing market.

  27. Posted by anonn

    The $729,750 limit has been extended through 2010 by Congress.

  28. Posted by SocketSite

    UPDATE: “Americans cut spending for the first time in five months and a gauge of confidence weakened, signaling consumers will make a limited contribution to the recovery without government incentives.”

  29. Posted by Stu

    I don’t know much about real estate, but if we can steer this thread back to grocery store prices…
    I used a safeway coupon last week for $1.50 off a loaf of safeway buttertop wheat (priced at $1.99), so that’s more than 60% off.

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