by Calculated Risk on 5/29/2014 02:22:00 PM

The BEA reported this morning that GDP declined at a 1.0% annual rate in Q1. This is disappointing, but not concerning looking forward.

The key driver of the downward revision was a much larger negative change in private inventories (see table below that shows the contribution to GDP from each major category). In the advance release, change in private inventories subtracted 0.57 percentage points from GDP. With the 2nd release - based on more data - change in private inventories subtracted 1.61 percentage point. This was payback from the positive contribution in Q3 last year (change in private inventories tends to bounce around quarter-to-quarter).

There were also downward revisions to investment in nonresidential structure, trade, and state and local government.

PCE was revised up from 3.0% to 3.1% in Q1 (annualized growth rate), and the contribution from PCE to GDP increased slightly.

This weakness will not continue - growth has already picked up in Q2.  And I expect both residential investment and state and local governments to add to growth soon.  And even investment in nonresidential structures should turn positive.

The growth story is intact.  No worries.

Revision: Contributions to Percent Change in Real Gross Domestic Product
	Advance	2nd Release	Revision
GDP, Percent change at annual rate:	0.1	-1.0	-1.1
PCE, Percentage points at annual rates:
Personal consumption expenditures	2.04	2.09	0.05
Investment, Percentage points at annual rates:
Nonresidential Structures	0.00	-0.21	-0.21
Equipment	-0.32	-0.18	0.14
Intellectual property products	0.06	0.19	0.13
Residential	-0.18	-0.16	0.02
Change in private inventories	-0.57	-1.62	-1.05
Trade, Percentage points at annual rates:
Net exports of goods and services	-0.83	-0.95	-0.12
Government, Percentage points at annual rates:
Federal Government	0.05	0.05	0.00
State and Local	-0.14	-0.20	-0.06

by Calculated Risk on 5/29/2014 10:00:00 AM

From the NAR: Pending Home Sales Edge Up in April

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 0.4 percent to 97.8 in April from 97.4 in March, but is 9.2 percent below April 2013 when it was 107.7.
...
The PHSI in the Northeast increased 0.6 percent to 79.3 in April, but is 12.0 percent below a year ago. In the Midwest the index rose 5.0 percent to 99.2 in April, but is 6.9 percent below April 2013. Pending home sales in the South slipped 0.6 percent to an index of 111.9 in April, and are 6.4 percent below a year ago. The index in the West declined 2.9 percent in April to 88.4, and is 15.0 percent below April 2013.

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in May and June.

by Calculated Risk on 5/29/2014 08:41:00 AM

From the BEA: Gross Domestic Product: First Quarter 2014 (Second Estimate)

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 1.0 percent in the first quarter according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6 percent. ...

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, real GDP was estimated to have increased 0.1 percent. ...

The second estimate of the first-quarter percent change in real GDP was revised down 1.1 percentage points, or $43.7 billion, from the advance estimate issued last month, primarily reflecting a downward revision to private inventory investment and an upward revision to imports that were partly offset by an upward revision to exports.

Here is a Comparison of Second and Advance Estimates. PCE growth was revised up from 3.0% to 3.1%.

The DOL reports:

In the week ending May 24, the advance figure for seasonally adjusted initial claims was 300,000, a decrease of 27,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 326,000 to 327,000. The 4-week moving average was 311,500, a decrease of 11,250 from the previous week 's revised average. This is the lowest level for this average since August 11, 2007 when it was 311,250. The previous week's average was revised up by 250 from 322,500 to 322,750.

There were no special factors impacting this week's initial claims.

The previous week was revised up from 326,000.

The following graph shows the 4-week moving average of weekly claims since January 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 311,500.

This was below the consensus forecast of 317,000.  The 4-week average is at the lowest level since 2007 and at normal levels for an expansion.

by Calculated Risk on 5/28/2014 06:54:00 PM

From the WSJ: Contracting Economy? What to Watch in Thursday’s Report on U.S. GDP

Economists surveyed by The Wall Street Journal forecast it will show GDP contracted at a 0.6% annual rate in the first three months of the year. ...

Since the recession ended in June 2009, U.S. GDP growth has dipped into the red only once: the first quarter of 2011, when economic output contracted at a 1.3% rate.

It appears likely to happen again. But economists aren’t worried about a prolonged downturn. Most have chalked up the weak first quarter to transitory factors like the brutal winter weather, and expect to see a significant rebound this spring.

Economists frequently blame weakness on the weather ... but sometimes it really is the weather!

Thursday:
• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 317 thousand from 326 thousand.

• Also at 8:30 AM, Q1 GDP (second estimate). This is the second estimate of Q1 GDP from the BEA. The consensus is that real GDP decreased 0.6% annualized in Q1, revised down from the advance estimate of a 0.1% increase.

• At 10:00 AM, Pending Home Sales Index for April. The consensus is for a 1% increase in the index.

by Calculated Risk on 5/28/2014 01:46:00 PM

I use the weekly Freddie Mac Primary Mortgage Market Survey® (PMMS®) to track mortgage rates. The PMMS series started in 1971, so there is a fairly long historical series.

For daily rates, the Mortgage News Daily has a series that tracks the PMMS very well, and is usually updated daily around 3 PM ET. The MND data is based on actual lender rate sheets, and is mostly "the average no-point, no-origination rate for top-tier borrowers with flawless scenarios". (this tracks the Freddie Mac series).

MND reports that average 30 Year fixed mortgage rates declined today to 4.08% from 4.16% yesterday.

One year ago rates were at 3.81% and rising. If the current rate holds, mortgage rates will be down year-over-year in about 3 weeks. As MND told me "Many borrowers would be getting quoted the same rates a year ago today".

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates