Housing: The Recovery Wrecker |
| BusinessWeek - May 29, 2008 |
The latest spike in oil prices has dampened but not doused investors' hopes that the worst of the economic and credit market woes are over. Recent reports show the economy, while still fragile, is holding up better than expected. Consumers haven't cut back in a major way, and tax rebates are arriving. Businesses are spending and hiring less, but the retrenchment has been mild—in part a reflection of resilient profits outside the financial sector. Most important, the credit markets, while hardly back to normal, are functioning better now, and the full impact of the Federal Reserve's rate cuts is yet to come.
But the economy still has a long way to go before investors will have any right to breathe easier. As sobering as $130 oil is, there's a different message for investors in the latest news on housing: Oil is not your biggest problem. The housing slump and its broad effects still weigh heavily on economic growth and have the greatest potential to wreck a recovery.
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- Posted: 2008-05-29 08:55:06
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