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Historically, US recoveries have always been fuelled by debt. Savings rates declined, car loans soared, and housing starts rebounded. In fact we have never had a US recovery without a previous recovery in housing starts.This time round, because there is already too much debt, savings rates have risen instead of fallen, car sales are OK at best, and housing is in the doldrums.
Starts are off their lows, but the contrast with previous cycles is abundantly clear. Vigorous it ain't -- and that's despite the steepest decline since data were first collected back in the 50s. Yet what did you expect? House prices are barely rising, credit remains tight, and consumers aren't exactly optimistic.
Still, with QE2, housing should at least hold steady. But don't hold your breath for a runaway boom.
(BTW, if you click on the image you'll be able to see it in its original size.)
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