The government is spending tens of billions to incent consumers to spend their money purchasing homes, cars and even energy-efficient improvements to their houses. Certainly we are seeing the results of these programs. Last month the "cash for clunkers" program contributed to a 2.7% gain in retail sales. Existing and new home sales have also been strong for several months now. However, there is a debate as to the long-term efficacy of these programs.
There is no doubt that the results are encouraging but will these results help us move out of the recession? The answer we believe is yes. However, these programs will contribute to the "stop and start" recovery we are expecting to occur. When incentives end, there will be a noticeable drop in demand. We must understand the fact that the government can't keep up these incentives forever. In the long run, a sustainable recovery is all about a building of confidence and the incentives should help us do exactly that.
Comments(0)