Pinch at the pump. The national average for a gallon of regular gasoline hit $3.78 on Thursday, according to AAA. That number represents a 15 cent jump in the past week, and 47 cents in the past month. I’m in California on assignment for WORLD, and the average here is $4.20, but I saw signs for gas in Los Angeles over $4.30. This rise in gas prices is especially tough on those who saw their taxes go up at the first of the year. The net effect will likely be a reduction in retail sales. We’re already seeing that at Walmart. Leaked emails from the retail giant described February sales as “disastrous.” “What we see making its way up the list of financial concerns is gas prices, particularly over the last couple of weeks,” Walmart’s U.S. President Bill Simon said on a conference call with reporters.
But real estate is recovering. There’s a joke in Hollywood every waitress is really an actress and every unemployed college graduate is really a screenwriter. But from what I’ve seen and heard in the few days I’ve been in Los Angeles, the “day job” of choice for film crews may be real estate. I was on the set yesterday of a new Jerry Lewis film in production called Max Rose. The atmosphere was relaxed and upbeat, and one of the guys on the set told me that he sold real estate on the side, and that the market was good. Recent data confirm his impression. Walter Maloney of the National Association of Realtors said one reason for the improvement in housing prices is the drop in the number of foreclosures. All told, sales of new homes jumped nearly 20 percent last year to 367,000, the most since 2009. Still, many economists don’t foresee a full housing recovery before 2015 at the earliest.
Even so, the stock market stalls. On Monday, the U.S. markets were closed because of the President’s Day holiday, so news coverage turned overseas, and we were reminded again that things are not great globally. On Wednesday, the minutes for January’s Federal Reserve meeting became public, and they revealed uncertainty and division among Fed officials about how long to continue Quantitative Easing III, or the purchase of about $85 billion per month in Treasury and mortgage bonds. And we’re still waiting on a budget deal out of Congress. The fact that we still don’t have one suggests we could see sequestration, or mandatory spending cuts. In fact, some conservative politicians say that sequestration might be the only way we’ll get spending cuts, so they’re not anxious to agree to a bad deal. So right now we’re at an impasse, and the markets, as the old saying goes, hate uncertainty. So that’s why we saw our first down week in the stock markets since the first of the year.
Speaking of Europe. The European Union’s official economists said this morning that the eurozone economy will shrink for the second year in a row in 2013 and the third year in the last five. According to a report in The Wall Street Journal, “The European Commission, the EU’s executive arm, forecasts a 0.3 percent contraction for 2013 and sees falling spending by businesses, consumers, and national governments pushing eurozone unemployment to a new high.” The report said unemployment would reach 27 percent in Greece, 26.9 percent in Spain, and 17.3 percent in Portugal. Marco Buti, the European Commission’s top non-elected leader, did not sugarcoat the situation: “This has grave social consequences and will, if unemployment becomes structurally entrenched, also weigh on growth perspectives going forward.”