Economics Update

The Bush administration is now, finally, predicting a slowing economy, with a GDP growth rate of 1.6%...though with a higher prediction of inflation at 3.8%, it's a net contraction, which is why they are also predicting an increase in the unemployment rate.

Given this environment, it is unsurprising that home prices fell in May by 0.9%, 15.8% year over year, which is grim.

What is surprising is that Consumer confidence was up a bit, to 51.9 from 51.0, but even 51.9 is very pessimistic.

We may be seeing a bottom of consumer pessimism, which is different from seeing a bottom to the credit crisis.

The slowdown seems to be driving the price of oil down, as well as the price of retail gasoline, and falling energy prices seem to be bolstering the dollar versus foreign currencies, though the bad news on Japanese unemployment, a 2 year high, may have contributed to this.

Still, the banks are buying lots of money from the Federal Reserve to deal with the liquidity problems, $75 billion this time, so we ain't out of the woods.

For your amusement, a cartoon: