Tea Leaf: Springtime view of the economy

Published: Wednesday, March 14 2012 10:00 a.m. MDT

Fed Chairman Ben Bernanke has taken all the fun out of being a Fed-watcher. The “old days” of trying to decipher every work, every nuance of Fed commentary or eyebrow twitching has now given way to the most recent Fed statement that the most important interest rate … the federal funds rate … will remain at an all-time low target range of 0.00-0.25 percent until late 2014. The rate has already been at such a level since December 2008 … boring.

Housing and mortgage rates

The painful fall of more than one-third in average U.S home values during the past five years could end later this year. Note: Economists said the same thing in 2010 and 2011.

Sustained, if not impressive, U.S. economic growth, rising employment and our collective sigh of relief of having dodged any major new bullets during the past three years suggests that housing values are attractive. Foreign buyers are busy buying U.S. properties … seeing great values. Thirty-year fixed-rate mortgages for conventional loans are now in the “high 3s” … a level not seen in 60 years.

The global economy

Europe and China dominate the headlines, now there’s a change. The Greeks finally obtained massive write-downs by major debt holders, in some arenas triggering “default” language. One can be certain that the Irish and the Portuguese will expect similar write-downs when their time in the sun returns. Anxiety about much larger Spain and Italy continues to smolder just under the radar.

Chinese leadership is trying to slow that dizzying economy down, with an eye to keeping inflation pressures and real estate bubbles under control. Indian growth has slowed as well. As usual, the Japanese economy is not doing much of anything. While frequently overshadowed by China, India and Japan, the combined economic output of South Korea, Singapore, Thailand, Vietnam, Indonesia, Malaysia and other Asian nations equals that of China.

Latin America has slowed somewhat, with Brazil growing at a much more modest pace than the high-flying growth of recent years. Brazil recently surpassed the United Kingdom to be considered the global community’s sixth largest economy.

Mexico quietly strengthens its economy, while drug cartel violence is all we ever hear about. Canadian growth has slowed somewhat, with the disparity between the energy-rich West … and the East dealing with the painful impact of a strong Canadian dollar on manufacturing exports and tourism. Meanwhile, Canadians are more than happy to buy real estate properties in warmer U.S. locations (think Arizona) at bargain-basement prices.

Could be better. Could be worse. Such is life in the big city.

Jeff Thredgold is the chief economist for Zions Bank and founder of Thredgold Economic Associates, a professional speaking and economic consulting firm. Visit www.thredgold.com.

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