US economy in a seesaw recovery: Harvard economist

And where the US goes, so goes the world, especially in manufacturing.

Stockmarkets may have decoupled, especially in China and the like, but when it comes to the chances of a sustainable burst of growth, we are all coupled to the US and nothing will improve until they get their house in order, domestic Chinese stimulus and all.

Martin Feldstein is a prominent Harvard economist and a member of the panel that defines US recessions (That's the group that called the US recession from December 2007 till now).

He's forecast the US economy would have "a temporary and substantial recovery this year", but would be falling into 2010. He told Bloomberg that economy would "seesaw":

"Feldstein -- a member of the private panel that dates the start of recessions and recoveries -- suggested the economy will contract into next year, and that the pattern of economic turnaround will be more of a seesaw than what he called "a beautiful symmetrical W," Bloomberg reported.

Hmmm, ''seesaw", "W: sounds like an escalation in imagery from the V, L and U-shaped recoveries used by other economists.

What happens if it's an "X" recovery? (Article,Source)

Wall Street rose: it liked better than expected profit reports and forecasts from General Mills, plans by Kraft to build more factories in Russia and Goldman Sachs said Yum brands was tasty. Investors ignored the continuing mixed tone to the data, except for the slight up turn in manufacturing.

Early reports during the day were tinged with optimism about June car sales and Ford and Nissan did better than had been expected, as did luxury brands BMW, Lexus and Mercedes.

(They were all down, but not by as much as forecast and a bit better than May).

But by the time the figures had been reported, tallied and crunched it was after the market closed, and that was a good thing.

The news was glum. US car sales last month actually fell from May's annual rate and there was no advance at all.

Car sales failed to crack the 10 million annual rate forecast before the figures were released by analysts who ignored the impact of the bankruptcies of GM and Chrysler.

Consumers are unpredictable creatures.

So naturally GM fell short of analyst estimates, as did Toyota.

The annual rate fell to 9.69 million cars and light trucks in June, from 9.9 million in May and 13.7 million in June 2008.

Autodata Corp, a tracking firm, said total sales fell 28%, to 859,847 vehicles, the 20th straight monthly decline.

So it was no wonder the big US car parts supplier, Lear Corp, went bust and filed for bankruptcy protection.

It was the latest in around 20 car parts groups to have failed in the US, according to figures quoted by Bloomberg.

Jobless numbers (out tomorrow for June), look poor with a private group seeing over 400,000 jobs cut; pending sales of existing US houses rose, slightly, to be up for yet another month; but construction spending fell in May after rising in April and setting off speculation that the battered sector was rebounding.

It's still down 11.6% in the year to May.

But mortgage applications crashed 19% last week, setting off fears the US housing sector will worsen in future months: higher interest rates and rising foreclosures are undermining efforts by the Fed and the Obama Administration to stem the slide in housing.

If lending is weak, how will sales of new and existing homes and especially refinancings rise, as many analysts now seem to be tipping?

To this end the Administration announced that it will extend its efforts to include people whose homes are valued up to 25% less than the size of their mortgage: the previous limit was just 5%.

That tells us more about the depths of the problem at the centre of the continuing US bust, the housing sector, than do surveys of manufacturing activity, or the about to be released surveys of activity in the much larger service sectors in various economies.