President Bush urges quick action on $150 billion economic expansion package…Number of U.S. homes in foreclosure last year jumped 79 percent from 2006…Conference Board says Consumer Confidence Index declined…
The House is overwhelmingly approving a $146 billion economic stimulus package that would write checks of $600 to $1,200 to most taxpayers. Congressional leaders want to send the measure to President Bush by February 15th, but the bill faces a future in the Senate, where Democrats and Republicans back a larger package that adds billions of dollars for senior citizens and the unemployed.
President Bush is urging quick Senate action on his economic stimulus package. And, in his final State of the Union address, he serves notice that he does not want to see it loaded up with extras like rebates for senior citizens living off social security and extensions of unemployment benefits for the jobless. He also threatens to veto any spending bill that does not cut in half the number of pet projects. Bush says he will send Congress a budget that terminates or substantially reduces 151 “wasteful or bloated programs” totaling more than $18 billion. The speech lasted 53 minutes, interrupted frequently by applause, most often by Republican lawmakers.
The number of U.S. homes in some stage of foreclosure last year jumped 79 percent from 2006 and the number of homeowners falling behind on mortgage payments suggests more of the same this year. The real estate tracking company RealtyTrac says about 1.3 million homes received foreclosure-related warnings last year, up from 717,522 in 2006. More than one percent of all U.S. households were in some phase of the foreclosure process last year, up from about half a percent in 2006. Nevada, Florida, Michigan and California posted the highest foreclosure rates. A late-year surge in the number of properties reporting foreclosure filings suggests that many are in the initial stages of the process and could end up lost to foreclosure this year unless lenders or the government steps in. Nearly two million subprime mortgages are scheduled to reset to higher interest rates this year and next.
Home prices in the U.S. dropped by a record 8.4 percent in November, compared to a year earlier. The decline in the Standard and Poor’s/Case-Shiller Index is a record. The November drop is the 11th straight monthly decline. The index tracks prices of existing single-family homes in ten metro areas. A broader, 20-city index was also lower, falling 7.7 percent in November. Miami led the pullback with a 15.1 percent decline. It was followed by San Diego, Las Vegas and Detroit. Only Charlotte, North Carolina, Portland, Oregon, and Seattle had higher annual growth rates.
A closely-followed gauge of the consumer’s mindset is indicating a decline. The Conference Board says its Consumer Confidence Index has declined to 87.9 from a revised 90.6 last month. That takes the index back to about where it was in November. The index has been weakening since last summer. Director of the Conference Board Consumer Research Center Lynn Franco says the survey indicates that there’s increasing pessimism about the economy. She says the percentage of consumers expecting higher earnings has declined and adds that could affect their spending decisions.
The Commerce Department says orders to factories for big-ticket manufactured goods soared in December by the largest amount in five months. The 5.2 percent increase was more than double what had been expected. The strength came from a big increase in demand for commercial aircraft, but even excluding the transportation sector, orders posted a solid 2.6 percent gain. An 11.3 percent jump in orders for commercial aircraft offset a 2.3 percent fall in demand for autos and auto parts. A closely watched category of business investment, non-defense capital goods excluding aircraft, rose by 4.4 percent in December. The unexpectedly big jump in December closed out a lackluster year for manufacturers. Orders for the total year managed to rise by just under one percent. It was the poorest showing since orders fell more than three percent in 2002, when the country was struggling to emerge from a recession.
The Federal Reserve has begun a two-day policy-setting session. It surprised observers last Tuesday when it announced an emergency rate cut of three-quarters of a point. Many observers believe it will continue to trim short-term rates, to counter what the central bank has described as increasing downside risks to growth. The Fed’s main tool for guiding the economy is the federal funds rate, the rate banks pay each other on overnight loans. It affects many others that are charged millions of consumers and businesses. That rate now stands at 3.5 percent, and could be down to 3 percent after the Fed wraps up its two-day meeting Wednesday.
The International Monetary Fund predicts the world economy will weaken this year, but the U.S. will be strong enough to avoid recession. The IMF has scaled back its October prediction of 1.9 percent growth in the U.S. economy in 2008, to a more modest 1.5 percent rate. It estimates 2007 saw a 2.2 percent growth rate. The IMF says the beleaguered credit market and slowing growth in the U.S. will hold the global economy back. And it says a five-year global expansion has slowed because of “financial disruptions.” Worldwide, the IMF expects growth to chug along at 4.1 percent, down from 4.9 percent in 2007.