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Recession Very Likely, Prominent Economist Says
July 25, 2006 (CRN)
CRN: What's your overall assessment of economic conditions for the next 12 months, particularly growth and business investment?
SHILLING: The economy is slowing, and I suspect that by the end of the year it could very well be in recession. The basic reason is that housing activity is weakening, and that has been the mainstay of consumer spending, which in turn has been propelling the economy. During the past 17 quarters of expansion, spending growth has exceeded income growth by 2.5 percentage points on average, on an annualized basis. And housing is what has been supporting that, with people pulling money out of housing by home equity loans or refinancing. Homeowners have been reasoning that their house is a continually refilling piggy bank, so they can borrow more on their credit cards or save less because their nest egg--all their saving requirements--is taken care of by that house.
AntiSpin: If I were running a tech company that sells products via resellers, I'd pay close attention to Shiller and this Computer Reseller News report. Business people with exposure to consumer spending need to pay especially close attention to Shiller's views.
July 25, 2006 (CRN)
CRN: What's your overall assessment of economic conditions for the next 12 months, particularly growth and business investment?
SHILLING: The economy is slowing, and I suspect that by the end of the year it could very well be in recession. The basic reason is that housing activity is weakening, and that has been the mainstay of consumer spending, which in turn has been propelling the economy. During the past 17 quarters of expansion, spending growth has exceeded income growth by 2.5 percentage points on average, on an annualized basis. And housing is what has been supporting that, with people pulling money out of housing by home equity loans or refinancing. Homeowners have been reasoning that their house is a continually refilling piggy bank, so they can borrow more on their credit cards or save less because their nest egg--all their saving requirements--is taken care of by that house.
AntiSpin: If I were running a tech company that sells products via resellers, I'd pay close attention to Shiller and this Computer Reseller News report. Business people with exposure to consumer spending need to pay especially close attention to Shiller's views.
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