Moody’s says More Stimulus, Foreclosure Aid Likely Needed
Moody’s has issued the first in a series of Special Comments looking at whether and how fast (or rather, how slowly) various sectors of the economy are recovering.
Focusing on corporates, it contains an overview of the economy and coverage of the following global industries: autos, base metals, chemical, consumer durables, homebuilders, media and entertainment, oil and gas, packaging, retail, steel, and transportation.
Moody’s answers some of the following questions for each of these industries:
- How is the credit picture different than it was a few months ago?
- Have conditions stabilized? Are they beginning to improve?
- Is improvement in credit conditions well-established or precarious?
- Why haven’t credit conditions gotten better?
- What has to happen to improve credit conditions further?
Moodys.com Chief Economist Mark Zandi writes that “Another round of fiscal stimulus may also be warranted. The current stimulus, which includes aid to state governments and unemployed workers, tax cuts and increased infrastructure spending, has not yet had time to work and it may very well succeed. It is no accident that the recession will wind down in the next few months as the stimulus payout ramps up. The impact on jobs and unemployment should show up more clearly later this year and early in 2010. ”
However, given how surprisingly severe this economic downturn has been, it is only prudent to consider the need for even more temporary tax cuts and spending increases for next year. -Mark Zandi, Chief Economist, Moody’s.com
“The Obama administration will almost certainly have to significantly adjust its response to the foreclosure crisis, Zandi adds. ” Foreclosures continue to surge, weighing heavily on already crashing house prices. As long as house prices are falling and undermining household wealth and the financial system’s capital base, a self-sustaining economic recovery will not take hold. For foreclosures to abate and house prices to stabilize anytime soon, policy efforts to mitigate foreclosures through loan modifications must soon begin to work more effectively. To date, the Obama administration’s foreclosure mitigation plan has not had a meaningful impact.”
For details, see: Are Corporates on the Road to Recovery.
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