With its $1.8 trillion economy, California tends to act as a early precursor to national trends in economics. According to story in the Wall Street Journal, the fall-out from its own recession could portend things to come in other states as well:
It's all but certain the U.S. economy is in a recession, as falling home prices and Wall Street turmoil have put the brakes on consumer spending and stoked unemployment. But California got there first. Now, the state provides a template of how a broad U.S. downturn could look.
With its export businesses, manufacturing sector, professional services and big retail employers, California looks like many other U.S. states, only more so. California's $1.8 trillion economy -- twice the size of India's and accounting for about 15% of the U.S. gross domestic product -- is powerful enough to have ripple effects nationally...
Friday, October 10, 2008
California: a bellwether for a national recession?
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The financial crisis in the US is expected to have a cascading effect on the Indian commercial real estate sector that has already slowed down considerably over the past one year. According to industry sources, there could be a softening in the values of commercial property to the tune of 10% to 15% post the US meltdown. As a result, vacancy levels in commercial space across the country are expected to touch 10% by the end of this year from 6% last June. Market analysts can see prices cooling and projects being held up because of the drying up of cheap funds. In fact, raising funds from US and Western European investors, who accounted for a bulk of FDI in the sector, will now be difficult. Mr. Anuj Puri chairman, Jones Lang LaSalle Meghraj says, "Flow of funds from the US will definitely come down, at least in the short term. Funds to both private and public equities of developers are likely to fall. They will have to look at new avenues like Middle-East and Korea. Although this development will have no direct impact on the real estate sector, there may be indirect ramifications. Foreign capital for private equity investments in Indian real estate may be affected, and the stock of listed companies invested in these portfolios could take a beating due to negative sentiments."For more view- realtydigest.blogspot.com
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