Perhaps it’s only fitting that the recovery cycle of a recession like no other would itself be like no recovery that has come before. The continued—and oddly sluggish—recovery cycle the U.S is currently experiencing in not, according to a new report by Fitch Ratings [1] and Oxford Analytica [2], on course to run the typical peaks-and-valleys cycle of the five major economic expansion periods the U.S. has experienced since the early 1970s.
“Conventional wisdom assumes certain patterns to economic recoveries, based on 40 years of global boom and bust in the U.S., Europe and Asia,” said John Olert, chief credit officer at Fitch. “But this recovery seems different.”
One major difference this time is that interest rates and stimulus spending will probably play diminished roles in the overall U.S. recovery, the report stated. This, despite the fact that interest rates historically play a rather prominent role in housing recovery.
Though the report qualifies U.S. interest rates to be “at supportive levels,” these rates have already been at or near historic lows for several years, and the economy is still shaking off the cobwebs. And because the overall economic picture has greatly improved from its 2009 and 2010 doldrums, and because housing markets are seeing more activity than in those years, interest rates are about to increase.
On top of that, the report found, the large financial stimulus that helped keep the economy from plummeting and spurred some recovery has declined significantly in the face of budgetary realities. So it, too, will not have the same effect on national growth.
It’s worth noting, however, that while the housing market is improving, it is not improving with the verve many economists had predicted just a couple months ago. In fact, a report released by Fitch Ratings in late April showed that sales of both new [3] and existing homes [4] in March fell short of expectations, while housing starts [5] also failed to live up to optimistic predictions that the end of an unusually harsh winter would spell growth in all areas of the housing sector. However, it is also worth noting that spring 2014 numbers are measured against those of spring 2013, which was, after a period of relative stagnation, an especially productive spring.
Still, economists who once predicted increasing demand and shrinking inventories upon the advent of spring have dialed down their talk of housing growth, even though Mike Simonsen, co-founder and CEO of real estate data firm Altos Research [6], said in April that it is not a good idea to draw conclusions about the demand for homes based on sales. “You can’t tell how many people want to buy homes by how many are sold,” Simonsen said.
Increasing confidence among many Americans that the economy is getting there may stem from housing recovery and a strong equity market, which are improving, just not as quickly as some had predicted. Fitch and Oxford suggested that the U.S. economy may also benefit in the long run from the energy boom—which, in some markets, such as Houston, where the coming Exxon Mobil headquarters development is expected to bring 10,000 jobs, has triggered significant growth in housing sales and construction—and global competitiveness through increased trade.