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Wednesday, April 15, 2009

The US Economy & BC Real Estate

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The US Labor Department released its Consumer Price Index for March and U.S. consumer prices fell again triggering the first recorded 12-month drop since 1955.

"The numbers speak to an economy that is in deep recession, but we're no longer in the shock mode of staggering numbers that speak to a serious slide lower in terms of macroeconomic activity," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

It is the manifestation of what is driving the US Federal Reserve to print Trillions of dollars in stimulus money. Deflation has gripped America.

Deflation is a broad-based decline in prices that can undercut an economy by leading consumers to hold off purchases in the hopes of even lower prices.

And when US consumers hold off on spending, it doesn't take a fortune teller to predict what it means for BC.

Unless BC suddenly finds new ways to advance its economy, it will slow to a crawl, unemployment will remain high, trade surpluses will become deficits, and reduced government revenue will make it increasingly difficult for the provincial government to balance the books.

Tourism will tank this summer, the mining industry will suck wind, and the forestry industry will be watching trees grow bigger and taller.

It also means no American and European buyers to descend on Vancouver to fuel an Olympic Real Estate bounce.

The average single family house price in Vancouver is now down 14.2% from it's peak. It could well be down 25% by the end of the year.

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Email: village_whisperer@live.ca

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