Auto Sales May Give Economy a Boost

[Oct 16, 2007.]

 

he economic picture is brightening, thanks to an upsurge in auto sales. Sales of cars soared 2.8%--the biggest jump in a year.

Meanwhile, the Commerce Department is also reporting that retail sales jumped 0.3% in August. However, the rise was less-than-encouraging news for those who continue to see recession in the country's near-future.

In other economic news, industrial production rose 0.2% last month, boosted by an upsurge in utility production. The rise in the utility sector appeared to be the result of a summer heat wave which boosted demand for air conditioning.

Experts say that consumers are exercising caution in their spending. There may be numerous reasons for this, including the housing slump, sky-high gas prices, and unemployment concerns. Such discouraging signs have increased lobbying for lower interest rates.

Consumer confidence is at its lowest rate since May of 2006. The rate dropped to 71.1 at the start of September.

Consumer spending is a key economic indicator because it accounts for most of the economic activity in the U.S. If it continues to wane, a recession may be on its way.

Worries about joblessness intensified as businesses reduced their August workforce by 4,000. The figure represents the first significant job losses in 4 years.

House sales are also expected to worsen in the next few months because of the foreclosure crisis. As homeowners fall behind on their loan payments, they've been forced to put their houses on the market, resulting in a glut of available properties.

Also, lenders are tightening requirements for mortgages. As a result, would-be homebuyers are finding it much more difficult to obtain loans than they have in the past.

Financial institutions have been particularly cautious since the collapse of the subprime market, with some lenders actually getting out of the mortgage business altogether as a result of the high default rate.

Julie Ann Amos
October 16th 2007

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