Obama’s new Plan reveals “uncertainty”


The new ACC weekly report rightly notes that “any economic recovery will likely begin with a turnaround in the residential housing situation”. This is also the critical issue for the chemical industry, still reeling from last week’s Lyondell bankruptcy filing. Yet as the ACC’s chart shows above, no improvement is yet in sight. New home inventory is now 11.5 months, compared to just over 9 months in the early 1990’s recession.

Stock markets have been hopeful that the new ‘American Recovery and Reinvestment Plan’, being proposed by President-elect Obama, will mark a turning point. But a new analysis by the incoming Administration of its own Plan does not build confidence.

One can certainly praise the authors for their honesty, but it is disturbing to find them emphasising that “all of the estimates presented are subject to significant margins of error”. In fact, the blog counted 9 uses of the word “uncertainty”. And the conclusion of the Executive Summary is that “uncertainty is surely higher than normal now”.

The blog will judge the Plan, when it is finally published, on the same basis as it judged the earlier $700bn TARP plan. Will it “do anything about the excess supply of homes and the large number of mortgage borrowers in dire straits”? For the moment, the signs are not hopeful.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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