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General Econ Low

The economy is down now – IMF is losing confidence

YUKHANANOV 6/16 [Anna Ykhananov, “IMF cuts U.S. growth outlook, says full employment years off” Reuters, 6/16/14. http://www.reuters.com/article/2014/06/16/us-imf-usa-idUSKBN0ER1IH20140616]

The International Monetary Fund cut its growth forecast for the United States on Monday and said the economy would not reach full employment until the end of 2017, allowing interest rates to be held near zero for longer than financial markets expect. In its annual health check of the U.S. economy, the IMF cut its 2014 forecast to 2 percent from the 2.8 percent it predicted in April, due to a weak first quarter. It kept its 2015 forecast unchanged at 3 percent, as job creation picks up after a harsh winter. "Recent data ... suggest a meaningful rebound in activity is now underway and growth for the remainder of this year and 2015 should well exceed potential," the IMF said.¶ Yet the country's potential growth should only be around 2 percent going forward, below historical averages, as the population ages and productivity growth slows, it added.¶ To help support the economy and fight persistently high poverty, the IMF urged the United States to boost the minimum wage. The federal minimum wage is now at 38 percent of the median wage, below most international standards, it said.¶ The IMF said its forecasts show the economy would only return to full employment by the end of 2017, with inflation remaining low. "If true, (Fed) policy rates could afford to stay at zero for longer than the mid-2015 date currently foreseen by markets," it said.¶ At the same time, the IMF warned that financial markets could be too complacent about possible volatility as U.S. rates rise, with the Fund's managing director, Christine Lagarde, citing a "halo of uncertainty" around the outlook.

The US economy is in shambles

Kurtz 6/16 [Annalyn Kurtz, “U.S. Economy: Not Looking So Good.” CNN Money June 16, 2014. http://money.cnn.com/2014/06/16/news/economy/imf-us-forecast/] 

Here's how bad the first quarter was: The data already show the economy contracted in the first quarter, but now it looks like that contraction was the deepest decline since the Great Recession. The housing market slowed, businesses invested less money in new equipment and buildings, and exports of American goods declined.¶ Economists still believe the first quarter downturn is a one-time blip, caused mostly by brutal winter. Snowstorms put new home construction on hold, slowed shipments of goods, and dissuaded people from going out to car lots to buy new cars.¶ The one bright spot supposedly came from consumers spending more of their money, particularly on services like health care. With Obamacare coming into effect, the Commerce Department assumed health care spending rose dramatically in the first quarter. Now, it looks like that assumption was flawed. Friday shows health care spending was far weaker than expected in the first quarter. As a result, economists are now forecasting the economy contracted at an annual rate of 1.5% to 2.4% in the first three months of the year, even weaker than the 1% contraction already reported by the Commerce Department. (The Commerce Department will revise its GDP numbers next week).¶ If that's the case, achieving 3% growth for 2014 overall will be next to impossible. The economy would have to grow at around a 4.6% annual pace for the next three quarters in a row.

The housing economy is down – this prevents future growth

Elboghdady 5/28 [Dina, syndicated reporter covering consumer advocacy and the housing market, “Freddie Mac: Many of the Nation’s Housing Markets are Stalling,” 2014, Washington Post, http://www.washingtonpost.com/blogs/wonkblog/wp/2014/05/28/freddie-mac-many-of-the-nations-housing-markets-are-stalling]
The bad news keeps piling up on the housing front, this time with glum statistics from mortgage giant Freddie Mac, which declared Wednesday that many of the nation’s housing markets are stalling. The third installment of Freddie’s “Multi-Indicator Market Index” (or MiMi), which sizes up homebuying activity and other factors, found that only 10 states and the District of Columbia fall in the “stable” range, as do four of the 50 metro areas included in the indexSan Antonio, New Orleans, Austin and Houston. The outlook for the rest of the housing market looks bleak. “Less than half of the housing markets MiMi covers are showing an improving trend, whereas at this time last year more than 90 percent of these same markets were headed in the right direction,” Frank Nothaft, Freddie’s chief economist, said in a statement. The index draws from various data sources, including Freddie’s own business with more than 2,000 mortgage lenders across the country, to assess the health of the single-family housing market. The company said it benchmarks a market’s performance against that market’s historical norm, taking into account home purchase applications, employment, mortgage delinquencies and other factors. It then averages the weighted indicators to pull together a composite value, with a score of zero indicating a stable market. Based on the index, Freddie labels a market “weak” when its value falls below a negative 2 or “elevated” when it ranks above 2. It does not factor in cash-only sales, which make up roughly 40 percent of home sales today, or loans that do not meet Freddie Mac criteria. The national value of the index stood at -3.06 points in March, with a three-month flat trend in housing activity. Freddie crunched numbers going back to 2001, and found that the all-time low was -4.49 in November 2010, during the depths of the housing crisis. North Dakota was the highest-ranked “stable” state, with Wyoming, the District of Columbia, Alaska and Louisiana among the top of the list of 10 states that are considered to be in balance. Even before the index came out, Freddie had revised its forecast for the housing market downward. Earlier this month, Nothaft said there are “various imbalances” holding it back, most notably the job market. “Housing needs stronger, and just as important, sustained levels of job creation to get the housing engine firing on all cylinders,” he said. Other industry gauges show that sales of existing homes were down nearly 7 percent from the same time a year ago, home prices are starting to moderate, and builders still lack confidence in the housing market.

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