Have you noticed . . . the economy is looking better? Positive economic reports are coming out faster these days. That’s encouraging. After all, we know the boating industry will not lead out of this recession but growth in other sectors will signal what is ahead for us.
Recent good news includes:
• A report that the sale of existing homes grew for the 8th straight month, home prices appear to be finally stabilizing and sales are up 24 percent since January’s bottom.
• The U.S. Department of Commerce just reported the GDP grew 3.5 percent in the third quarter of 2009. Yes, a major part of that was the effect of $3 billion pumped into Cash for Clunkers. But, the GDP still grew 1.9 percent without the auto figures.
• The Dow Jones has made a significant recovery and has been flirting with the 10,000 mark.
• In the last quarter, U.S. industrial production posted its sharpest rise in four years. But, manufacturers are expected to increase production without large-scale hiring, at least early on, so the unemployment rate will continue high into 2010. However, Treasury Secretary Tim Geithner is predicting the rate will begin improving in the first quarter next year.
• The U.S. Census Bureau announced estimates of retail and food services sales for September decreased 1.5 percent. But, that’s not the whole story. If you remove auto sales which slumped after the end of the Clunkers deal, retail spending was up 0.5 percent.
Now, we might feel genuinely good about all this if it weren’t for a deep underlying problem that needs more attention. I’m referring to our budget deficit and our debt, both exploding because the Administration and Congress have a voracious appetite for spending. While the government gets money to finance obscene deficits, it’s sucking up all the available supply creating an unprecedented cut-off of credit to small businesses and consumers.
According to the Federal Reserve Statistical Report (Sept. 17, 2009), in the first half of last year, the U.S. Treasury raised funds at the annual pace of $411 billion in the first quarter and $310 billion in the second quarter. This year, the Treasury has stepped up its borrowing to annual rates of $1.443 trillion in the first quarter and $1.896 trillion in the second quarter, 3.5 times and over 6 times more than last year, respectively! Meanwhile, the private sector is getting killed.
Last year, banks provided new credit at the annual pace of $472.4 billion in the first quarter and $86.7 billion in the second. This year, they are reportedly not providing any new credit. No surprise there! Worse, were actually dumping loans at the rate of $857.2 billion in the first quarter and $931.3 billion in the second. Is it any wonder we’re shut out of the credit markets?
Two things must start happening for boating to begin moving out of this recession. First, Washington must put the brakes on new spending proposals and tax increases (i.e. as contained in health care, cap & trade, doctor’s offsets and so on) and go to policy changes that reduce taxes to stimulate growth.
Second, our industry must continue to drive the message that the credit markets must be reopened to small businesses if any real recovery is to be experienced. In this regard, our national associations — NMMA, MRAA, NMBA, among others – are diligently banging on doors like the SBA, Dept. of Treasury, the Federal Reserve and Congress to show them the recipe for recovery and job growth is the availability of wholesale and retail credit. If you want to help as a dealer, take time to write your senator and congressman and give them the same message.