Tags: Buffett | Construction | Industries | Depression

Buffett: Construction-Related Industries in Depression

Monday, 14 Nov 2011 08:26 AM

The overall economy is in pretty good shape save for the construction industry and any sector heavily tied to it, which remain mired not in recession but in depression, says legendary investor Warren Buffett.

Buffett told CNBC that his company Berkshire Hathaway controls a large cross section of American companies, who in turn own more companies, which gives him perspective on the health of the U.S. economy.

Most are doing well — very well, actually. But the ones that aren't are really pummeling the economy.
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"We have more than 70 businesses and some of those businesses have many businesses, so we've really got a cross section of American business. ... Of the 70-plus businesses, all but about five are doing considerably better than was the case a year ago," Buffett tells CNBC.

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Warren Buffett
(Getty Images photo)
"What is getting killed, and what is not in a recession but in a depression is anything connected with residential construction, and that includes things like our carpet business, our installation business, our brick business."

"Those businesses are in a depression. You have a huge segment of the American economy that's doing really quite well and then you have this other segment, which is in a depression, and that depression has much more of an effect on unemployment, I believe, than we generally realize."

While the U.S. economy has been officially in growth mode since 2009, high unemployment rates make it feel for many that the country is stuck in recession, helping to keep growth rates low and lending and investment at bay.

Unemployment rates are hovering around 9 percent and refuse to come down.

Keep an eye on housing starts, as when they improve so will the economy, Buffett adds.

"When that comes back, when we get a million housing units annually started, I think unemployment will go down a lot."

In September, new housing construction jumped 15 percent to a seasonally adjusted annual rate of 658,000 units, according to Fox Business.

To tweak housing and the rest of the economy, Buffett said further easing measures from the Federal Reserve would not be necessary, adding the sector should recover on its own.

"I don't think stimulus is needed. What's needed in housing is to create more households than housing units," Buffett says.

"Hormones still kick in, and we'll still form households," Buffett says.

Demand for new homes remains weak in the U.S., especially with such a glut of homes built up in the housing boom.

Many Americans are finding it easier and more convenient to rent than buy, which will likely keep housing starts weak for some time to come.

"I’d love to see it as something concrete, but I just don’t see that happening," says Steve Palm, president of Smart Numbers, an Atlanta-based real-estate data firm, Fox Business adds.

"We’re not going anywhere. We’re just plodding along. The economy definitely has to improve and housing isn’t going to lead us out of this."



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The overall economy is in pretty good shape save for the construction industry and any sector heavily tied to it, which remain mired not in recession but in depression, says legendary investor Warren Buffett. Buffett told CNBC that his company Berkshire Hathaway controls a...
Buffett,Construction,Industries,Depression
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2011-26-14
Monday, 14 Nov 2011 08:26 AM
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