Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights the ISM Index and discusses recent European market unrest.
- Europe is in a financial mess and it is affecting the U.S. economic outlook.
- Margaret Thatcher is said to have quipped that “socialism works until the money runs out”. Europe is in a desperate need of money to help bailout Greece and other peripheral countries that have run up gigantic-sized public debt. The bailout in essence is to save the Euro currency. Non-Euro currencies like the Swiss Franc, Australian Dollar, Brazilian Real and Japanese Yen have all strengthened in recent years. Interestingly, the U.S. dollar has not strengthened against the Euro.
- Some smaller northern countries like Norway, the Netherlands, Denmark, and Finland are in great financial shape but are too small to make an impact. Only Germany and France are of meaningful size to provide bailout money. Germany has the money but German citizens are angry about throwing money at other countries. France thought it had money, but it is plausible for the country to actually find itself on the other side of the tracks, begging for bailout money.
- On a positive note in the U.S., the latest data on the service industry showed a modest improvement, which eases a fear of a second recession. The ISM non-manufacturing index rose to 53.3 in August from 52.7 in the prior month. The index needs to remain above 50 to ensure that the economy is expanding.
- The index is down from near 60 in the early part of the year, but this very timely indicator is implying that the economy has enough juice to motor along, albeit at a slow pace.