The U.S. economy is presently in a period of adjustment. According to the Mortgage Bankers Association, U.S. homeowners are having a harder time keeping up with mortgage repayments, with the delinquency rate increasing to 4.67%. A year ago, the figure was 4.44%. The possibility of increased customer defaults could further damage the US housing market seems increasingly likely.

The housing market will continue to have an effect upon the wealth and equity of property owners, who are likely to suffer the consequences of the slowdown in the market throughout 2007. The slump in the housing market may dampen consumer spending, which in turn will decrease the level of U.S. GDP, which is likely to be around 2.8 percent in 2007, down from 3.4 percent last year.

The collapse of the sub prime mortgage market may prove to be the biggest cause for concern for the U.S. property market. The sector serves borrowers with poor credit histories at high interest rates, and has seen rising defaults due to stagnant or falling home prices combined with slower sales.

The unemployment figure forecast for 2007 is currently at 4.7. Overall, jobless claims are still at a level that most economists see as consistent with the solid pace of employment growth. This is an important issue, as one of the determining factors affecting consumer spending and the economy is employment figures.

According to the Federal Reserve, manufacturing has remained ‘sluggish’ – especially in industries related to the housing sector.

The U.S. is currently witnessing increased levels of export growth, which has largely been driven by the weaker dollar and strong economic growth abroad. The growth in exports has had a large influence on the U.S. trade gap, which has been falling since last year.

U.S. consumer prices have also increased, with the cost of food rising at its fastest rate for two years.

Energy prices fell at the start of the year, but are increasing, with petrol prices looking set to rise. Higher oil prices as a result of higher energy costs could also place additional strain on the economy. The rise in oil prices has been caused by lower U.S. supplies as well as concerns over oil-producing Iran.

Presently, the Federal Reserve has maintained interest rates at 5.25%, where it has been since last June.

Recent observations have concluded that inflation is not growing; suggesting that using interest rates to curb inflation has proven to be favourable so far. Inflation, as measured by the Consumer Price Index, is projected at 2.0 percent this year, down from 3.2 percent in 2006.