In Seattle, sales at a long-established hardware store, Pacific Supply, are suddenly dipping. In Oklahoma City, couples planning their weddings are demonstrating uncustomary thrift, forgoing Dungeness crab and special linens. And in many cities, the registers at department stores like Nordstrom on the higher end and J. C. Penney in the middle are ringing less often. þþIn Seattle, sales at a long-established hardware store, Pacific Supply, are suddenly dipping. In Oklahoma City, couples planning their weddings are demonstrating uncustomary thrift, forgoing Dungeness crab and special linens. And in many cities, the registers at department stores like Nordstrom on the higher end and J. C. Penney in the middle are ringing less often. þþSeattle’s real estate market has slowed, but prices have held relatively steady. Even so, sales at the Pacific Supply Company, a hardware store in the Capitol Hill neighborhood, have fallen by 5 to 10 percent in the last few months.þþ“There’s a general sense of caution,” Michael Go, the store’s general manager, said.þþRitz Sisters sells gift items like soaps and chocolates to shops and catalogs throughout the Pacific Northwest. In recent months, orders have fallen by one-fifth, said Tim Creveling, a co-owner of the business.þþ“People are just hunkering down,” he said.þþIn Oklahoma City, Aunt Pittypat’s Catering has lost one-fifth of its business in the last two months, as $25,000 weddings are scaled down to smaller affairs.þþ“People are just being a lot more conservative,” said Maggie Howell, a co-owner. “They want crab and seafood, but they’re settling for cheese displays.”þþIn Cleveland, Lincoln Electric, which makes welding gear, has also experienced a slowdown. “Our growth is relatively anemic in North America,” said Vincent Petrella, its chief financial officer.þþThe slowdown has proved severe enough to poke a hole in the idea that sales abroad can carry the economy even if they dip at home. þþIn North Carolina, Power Curbers, which makes equipment that turns concrete into curbs, has been sending more gear abroad. But domestic sales plummeted by one-fourth during the first two months of the year, Dyke Messinger, the company’s president, said. In mid-February, Power Curbers laid off 6 of the 80 workers at its factory near Charlotte.þþMany economists forecast that overall consumer spending will slip 1 percent for the first three months of the year. þþ“That’s a wow,” said Robert Barbera, chief economist for the trading and research firm ITG. “Outright declines for real consumer purchases are unusual.”þþWhat is shaping up as the second recession of the 2000s is the product of declines in home values, which play a far bigger role in most Americans’ personal finances than the stock market. Households have borrowed against the increased value of their property to buy cars, send their children to college and add home theater systems.þþ“This is the bedrock asset for the lion’s share of the population of the United States,” Mr. Barbera said. “It’s not like dot-com stocks, where I bought Webvan for 1,000 times the imaginary earnings, and now it’s worth nothing but I go and have a beer. You’re talking about the value of people’s houses.” þþAs economists try to assess the likely contours of the unfolding downturn, many see parallels in the recession of 1990 and 1991.þþThen, as now, the dollar was weak, oil prices were high and trouble started with a sharp slide in housing prices, followed by major losses for mortgage lenders. The resulting savings and loan crisis spurred a buyout that cost taxpayers $240 billion in inflation-adjusted terms, and it brought a severe tightness of credit.þþThat recession lasted eight months, slightly less than the average for downturns going back to 1946, according to the National Bureau of Economic Research. This one, though, could drag on longer, some economists say, because the underlying forces are more difficult to attack, even though Washington has been much more active, much earlier in lowering interest rates, sending out tax rebates and taking other measures to arrest an economic decline. þþBack in the late 1980s, lending was concentrated in fewer hands. Once the government calculated the size of the problem in the saving and loan industry and assented to the bailout, confidence was restored and the wheels of finance turned anew. þþThis time, the size of the bad debts remains a mystery, with estimates reaching $400 billion. Markets fret that the next Bear Stearns could pop up anywhere.þþThe first signs of what became the mortgage crisis emerged back in August.þþ“Yet we’re still fighting it,” Mr. Darda said. “We’re still dealing with this paralysis.”þþ
Source: NY Times
