October 2007

PNC CHIEF ECONOMIST STUART G. HOFFMAN

Stuart G. Hoffman with Brian Bailey & Beverley Baxter

The recent economic news has felt like a roller coaster ride.  The economy’s April-June growth rate was 3.8%, the strongest in over a year.  But the National Association for Business Economics predicts that growth in the third quarter will have slowed to around 2.4%.  The Commerce Department reported that new-homes sales in August fell to the lowest level in seven years and dropped 8.3% from July.  The median sales price fell by 7.5% from a year earlier, the biggest percentage drop in 37 years.

The Labor Department reported that the U.S. lost 4,000 jobs in August, the first job loss in four years.   Demand for big-ticket items, such as cars, appliances, and machinery, dropped in August by the largest amount in seven months and the Conference Board reported that consumer confidence sagged to a nearly 20-year low in September.  Former Fed Chairman Alan Greenspan told the AP that the odds of a recession are now higher than 1-in-3.

Noting that “the tightening of credit conditions has the potential to intensify the housing correction and restrain economic growth more generally,” the Federal Reserve reduced its benchmark interest rate by 5%.  In response, the stock market soared.  But the dollar is down.

Delaware is faring better than many states, but it is being impacted, as well.  Delaware’s housing market has not crashed, but it has clearly slowed. At its September meeting, DEFAC reported that State revenues will increase from 2006 levels, but by less than predicted in June, with personal and corporate income taxes, as well as bank franchise fees, down 10% from earlier projections.

Stuart Hoffman is Senior Vice President and Chief Economist for The PNC Financial Services Group and the principal spokesperson on all economic issues for PNC.  He was recognized as the second most accurate economic and interest rate forecaster for 2006 by USA Today, as the most accurate forecaster for 2004 by BusinessWeek, and one of the top forecasters in The Wall Street Journal economic survey covering the 1988 to 2006 period.

Stuart Hoffman will share his insights on the economy, present and future, and its impact upon the country, the region, and Delaware.

Beverley Baxter