Where are we in the economy?

I’m betting that I am unconsciously cherry-picking data here, but I do find it interesting that last month: New home sales rose by 2.7%; Sales of existing homes rose by 5%; Durable goods orders rose by 0.8%, the fourth increase in five months. Question:  could the fundamentals of the economy actually be stronger than the vicissitudes ...

By , a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast.

I'm betting that I am unconsciously cherry-picking data here, but I do find it interesting that last month: New home sales rose by 2.7%; Sales of existing homes rose by 5%; Durable goods orders rose by 0.8%, the fourth increase in five months. Question:  could the fundamentals of the economy actually be stronger than the vicissitudes of the financial markets suggest?  I suspect the answer is still "no," in part because the financial crisis itself has knock-on effects on the real economy.  Anecdotally, I can relate plenty of stories of institutions engaging in hiring freezes, deferring large-scale capital expenditures, and otherwise cutting spending because of financial turbulence and/or borrowing costs.  Unless and until that kind of delay ends, the financial markets will have an significant impact on the real economy.  UPDATE:  Hmmmm:  "General Motors on Wednesday said it had continued to feel the impact of the financial crisis in its third quarter sales but that the US had reached the bottom of its economic downturn." 

I’m betting that I am unconsciously cherry-picking data here, but I do find it interesting that last month:

Question:  could the fundamentals of the economy actually be stronger than the vicissitudes of the financial markets suggest?  I suspect the answer is still “no,” in part because the financial crisis itself has knock-on effects on the real economy.  Anecdotally, I can relate plenty of stories of institutions engaging in hiring freezes, deferring large-scale capital expenditures, and otherwise cutting spending because of financial turbulence and/or borrowing costs.  Unless and until that kind of delay ends, the financial markets will have an significant impact on the real economy.  UPDATE:  Hmmmm:  “General Motors on Wednesday said it had continued to feel the impact of the financial crisis in its third quarter sales but that the US had reached the bottom of its economic downturn.” 

Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner

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