America still in danger of recession by Corina Ciubotaru

Following the recent housing market slump, that America is just beginning to overcome, house prices are lower than they've ever been in the last 16 years. The annual price fall in the country's 10 major cities has reached 4.5%. Many major cities have hundreds of unsold homes so the only ones where prices are still rising are Dallas, Charlotte, Atlanta, Portland and Seattle. Since the collapse of the market, banks have been in their own heap of troubles and became less willing to grant loans given that failure to pay old ones is what triggered the situation. There has been a reduction also in the number of houses built and the entire construction industry was affected. The problems of American economy had an impact on other markets as well and the dollar has been recently falling in relation to the euro, but since the Fed cut the interest rate for banks, things have become better for a while. Still, unemployment is increasing, home sellers aren't willing to reduce prices and many fear a recession is coming to the U.S.A. since August data is worse than they expected after the Fed's cut in early September, from 5.25% to 4.75%. This cut alone was enough to surprise and please lenders, as it was previously viewed as only an unlikely possibility and now it will probably be up to the Fed again to sort out the dollar's problems and thus setting the economy on the right course once again. Could another half-point reduction be the answer?

related story: http://news.bbc.co.uk/2/hi/business/7012639.stm

by Corina Ciubotaru for PocketNews (http://pocketnews.tv)

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Edited by: Katarina Bosanska