by Calculated Risk on 10/11/2005 11:35:00 AM

As a follow up to the previous post, DiMartino writes: Soft landing isn't in cards for U.S.

A report by Morgan Stanley chief economist Stephen Roach highlighted the differences between the rest of the world and us.
...
We're a lot more reliant on the consumer sector, Mr. Roach says:

"The U.S. stands alone in the excesses of consumerism, with personal consumption averaging fully 71 percent of GDP since early 2002 – well above the 67 percent norm that prevailed over the 25-year period, 1975 to 2000."
...
The British also had the benefit of having a cushion to fall back on. The personal savings rate in Europe is 14 percent. In Japan it's 8 percent, and in China it's too high – 35 percent.

And here? Well, it doesn't exist. The savings rate has been negative for three straight months.

"Not since 1933 – hardly a comforting comparison – have consumers spent this far beyond their means," Mr. Roach observed. "No other country or economy comes close to matching the American model of excess consumption and negative saving."

DiMartino concludes:

Where are we going?

Home prices have begun declining in some markets. National inventories of new homes are the highest ever recorded, and stocks of existing homes are following in the same straight line upward.

"As sure as night follows day, pricing will follow this inventory overhang," said David Rosenberg, chief economist at Merrill Lynch.

Higher energy prices could not hit at a worse time, and the Fed is still raising interest rates. A soft landing seems like a far-off dream.

"... as night follows day ..."