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Friday Economic Snapshot: End of housing crisis?

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By Tom Kaiser
May 30, 2013
Filed under Features, Top Stories

With the Dow Jones Industrial Average spiking midweek, and then coming back to reality at the end of business on Thursday, the DJIA ended the week slightly up in the face of mixed economic indicators.

In a nutshell, this week we’ve seen slightly tighter credit with mortgage rates reaching the highest level in a year, US Gross Domestic Product (GDP) for Q1 revised slightly lower and unemployment claims increasing 10,000 from the previous week.

Revised GDP

The US GDP is the big kahuna with far-reaching implications. Consumers spending still looks solid, but government spending cutbacks are dragging down the economy enough that the U.S. Federal Reserve is expected to continue its stimulating monetary policy.

From the Bureau of Economic Analysis report:

Previously pegged at 2.5 percent, real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.4 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the “second” estimate released by the Bureau of Economic Analysis.

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures, private inventory investment, residential fixed investment, nonresidential fixed investment, and exports that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.”

Pending Home Sales Rise

From the National Association of Realtors came word that pending home sales increased slightly in April, continuing the buoyancy in housing and leading some pundits to declare that the American housing crisis is officially over.

According to the report, the Pending Home Sales Index rose 0.3 percent to 106.0 in April from 105.7 in March, and is 10.3 percent above April 2012 when it was 96.1.

The key nugget is the big increase over 2012. America’s houses new and old are selling, and the marketplace in some cities is getting downright cutthroat. This bodes very well for the overall economy, from automobiles, construction materials and recreational purchases.

With signs of an overheated housing market in pockets of the country, we’ll keep the fireworks and champagne inside … for now.

Consumer Confidence

Consumer confidence continues its positive trend as The Conference Board reported its best figures since February 2008 — more than five years ago.

The Conference Board Consumer Confidence Index rose to 76.2, up more than 7 points from April’s 69.0. It’s a clear sign that consumers are becoming more optimistic about the general state of the economy, the availability of jobs and overall business conditions.

Unemployment Claims Increase

The number of seasonally adjusted initial unemployment claims was 354,000, up 10,000 from last week’s figure. The four-week average is now 347,250, which is an increase of 6,750 from the previous week.

To put these not-great-not-awful numbers in perspective, initial claims were at 382,000 for the same period last year, and 363,000 for 2011. As you’ve heard for years, while our economy continues to steadily improve, the United States still has a serious long-term unemployment problem with no end in sight.

Takeaway

Some estimates have called for less travel over Memorial Day in 2013 than in previous years, with some blaming an end to the payroll tax holiday. It’s possible this quieter long weekend could have an impact on the next round of certain indicators, however the US economy appears to be powering through the much-predicted late-spring slowdown.

With warmer weather through much of the country, things are looking good in general, and for the marine business in particular.

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