Saturday, August 27, 2005

The Imminent Recession Part II – Looking for Clues

Not being an economist, I look for more "close to home" signs for for economic barometers. This morning I got a good one. As many of you know, I live in West Houston (TX), out in the exurbs surrounded by neighbors who all drive very large SUV's (all with W'04 stickers in the windows). While walking my dog, I started talking to one of my neighbors. He was test driving a 2003 Acura coupe. I asked why. He said the weekly gas burden on his Suburban was getting to be too much. He was hoping to cut his gas costs from $320/month to $160 per month.

This is the first tangible sign that I have seen, other than people bitching, that the recent runup in gas prices is taking a toll on the economy. Sounds like bad news for car companies who have bet big on large SUV's and Trucks (GM, Ford). Also, I expect the value of 2nd hand SUV's to depreciate in value as more and more come into the used car market

On the other hand, James Hamilton and Econobrowser has a much more technical discussion going on regarding the chances of a future (2006-07)recession.