by Calculated Risk on 4/28/2012 04:14:00 PM

A year ago, Dave Altig asked Just how out of line are house prices?. Dr. Altig's post featured both a price-to-rent graph and a real house price graph originally from the NY Times based on Professor Robert Shiller's work.

The price-to-rent ratio graph Dr Altig presented seemed to show that house prices were getting back to normal, but the graph based on Professor Shiller's work seemed to suggest that house prices could fall much further. Below is an updated graph from Shiller through Q4 2011.

The Shiller graph has suggested to many observers that house prices track inflation (i.e. that house prices adjusted for inflation are stable - except for bubbles). Last year I pointed out the slope depends on the data series used, and that if Professor Shiller had used either Corelogic or the Freddie Mac house prices series, before Case-Shiller was available, there would a greater upward slope to his graph.

An upward slope to real prices makes sense to me as I've argued before: "In many areas - if the population is increasing - house prices increase slightly faster than inflation over time, so there is an upward slope for real prices."

Click on graph for larger image in new window.

This is the updated graph from Professor Shiller.

For the underlying data for the NY Times graphic, please see Professor Shiller's Irrational Exuberance website.

It is important to realize that Professor Shiller used the quarterly Case-Shiller National index starting in 1987. From 1975 through 1986 he used what is now called the FHFA index. He used other price indexes in earlier periods.

The second graph shows the National Case-Shiller real prices and the CoreLogic HPI real prices (adjusted for CPI just like Shiller). For Q1, I used the February Corelogic index value.

The FHFA index used by Shiller was based on a small percentage of transactions back in the '70s. If we look at the CoreLogic index instead, there is a clear upward slope to real house prices.

If Professor Shiller had used the Freddie Mac quarterly index back to 1970 (instead of the PHCPI), there would be more of an upward slope to his graph too. So it is important to understand that for earlier periods the data is probably less accurate.

The third graph shows the upward slope for both real price indexes. Even the Shiller "Irrational Exuberance" real price index has an upward slope (about 0.5% per year) - and the CoreLogic upward slope is steeper (about 1.5% per year).

Right now the real CoreLogic HPI is only slightly above the trend line (it could overshoot), and the Case-Shiller national index will probably be just above the trend line when the Q1 data is released.

This would suggest nominal prices are at the bottom (and real prices are close too). This is one reason I think the Case-Shiller and Corelogic house prices indexes probably stopped falling, NSA, in March 2012 (the March data will be released next month).

Earlier:
• Summary for Week ending April 27th
• Schedule for Week of April 29th

by Calculated Risk on 4/28/2012 01:02:00 PM

Earlier:
• Summary for Week Ending April 27th

The key report for this week will be the April employment report to be released on Friday, May 4th. Other key reports include the ISM manufacturing index and vehicle sales on Tuesday, and the ISM non-manufacturing (service) index on Thursday.

In Europe, the ECB meets on Thursday, and France and Greece hold elections next Sunday, May 6th.

----- Monday, Apr 30th -----
8:30 AM ET: Personal Income and Outlays for March. The consensus is for a 0.3% increase in personal income in March, and a 0.4% increase in personal spending, and for the Core PCE price index to increase 0.2%.

9:45 AM: Chicago Purchasing Managers Index for April. The consensus is for a decrease to 60.8, down from 62.2 in March.

10:00 AM: Q1 Housing Vacancies and Homeownership report from the Census Bureau. As a reminder: Be careful with the Housing Vacancies and Homeownership report. This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates. However, based on the initial evaluation, it appears the vacancy rates are too high.

2:00 PM: The April 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve.

----- Tuesday, May 1st -----
All day: Light vehicle sales for April. Light vehicle sales are expected to increase to 14.4 million from 14.3 million in March (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the March sales rate.

TrueCar is forecasting:

The April 2012 forecast translates into a Seasonally Adjusted Annualized Rate (SAAR) of 14.6 million new car sales, up from 13.2 million in April 2011 and up from 14.4 million in March 2012

Edmund.com is forecasting:

April auto sales will continue at the strong pace set in the first quarter for an estimated Seasonally Adjusted Annual Rate (SAAR) this month of 14.4 million light vehicles

10:00 AM ET: ISM Manufacturing Index for April.

Here is a long term graph of the ISM manufacturing index. The consensus is for a slight decrease to 53.0 from 53.4 in March.

10:00 AM: Construction Spending for March. The consensus is for a 0.5% increase in construction spending.

----- Wednesday, May 2nd -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been weak this year, although this does not include all the cash buyers.

8:15 AM: The ADP Employment Report for April. This report is for private payrolls only (no government). The consensus is for 178,000 payroll jobs added in April, down from the 209,000 reported last month.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for March. The consensus is for a 1.6% decrease in orders.

----- Thursday, May 3rd -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decline to 378,000 from 388,000 last week.

9:00 AM: Ceridian-UCLA Pulse of Commerce Index™ This is the diesel fuel index for April (a measure of transportation).

10:00 AM: ISM non-Manufacturing Index for April. The consensus is for a decrease to 55.9 from 56.0 in March. Note: Above 50 indicates expansion, below 50 contraction.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

10:00 AM: Trulia Price & Rent Monitors for April. This is the new index from Trulia that uses asking prices adjusted both for the mix of homes listed for sale and for seasonal factors.

----- Friday, May 4th -----
8:30 AM: Employment Report for April. The consensus is for an increase of 165,000 non-farm payroll jobs in April, up from the 120,000 jobs added in March.

The consensus is for the unemployment rate to remain unchanged at 8.2%.

This second employment graph shows the percentage of payroll jobs lost during post WWII recessions through March.

The economy has added 3.58 million jobs since employment bottomed in February 2010 (4.05 million private sector jobs added, and 474 thousand public sector jobs lost).

There are still 4.8 million fewer private sector jobs now than when the recession started in 2007. (5.2 million fewer total nonfarm jobs).

by Calculated Risk on 4/28/2012 08:05:00 AM

The GDP report was weaker than expected with 2.2% real GDP growth annualized in Q1 (expectations were for 2.5%). This is disappointing growth, but final demand was a little better than overall GDP. Personal consumption expenditures increased at a 2.9% annual rate in Q1, and residential investment (RI) increased at a 19.1% annual rate. Weather probably boosted PCE and RI - and PCE growth at this rate is not sustainable without more income growth - but this was still decent.

Naturally most of the GDP commentary was pretty negative, but I was a little more sanguine. I expect some of the drag to diminish over the next couple of quarters - as an example, investment in non-residential structures was negative in Q1, however, based on the architecture billing index, I expect the drag from other non-residential categories (offices, malls) to end mid-year. And there was another negative contribution from government spending at all levels. However, it appears the drag from state and local governments will end mid-year (after declining for almost 3 years).

A bright spot - and perhaps the key story - is that residential investment is continuing to increase, and I expect this to continue all year (although the recovery in RI will still be sluggish compared to previous recoveries). Since RI is the best leading indicator for the economy, this suggests no recession this year. Still, overall, this was a weak GDP report.

The new home sales report for March was solid and is further confirmation that the recovery for the housing industry has started. New home sales are up about 17% from the weakest three month period during the housing bust. That is a significant improvement, even if the absolute levels are still very low. The debate is now about the strength of the recovery, not whether there is a recovery. My view is housing will remain sluggish for some time, and I expect 2012 to be another historically weak year, but better than 2011.

Another key report was the Case-Shiller house price index for February. This showed house prices fell to new post-bubble lows (I expect further declines in the March report), but we are starting to see some improvement in the year-over-year change. House prices are important for the economy, and I'm watching closely for signs that prices have stopped falling.

The NMHC Apartment index showed further tightening (suggesting falling vacancy rates and rising rents), and the consumer sentiment index increased. For manufacturing, the Richmond Fed index increased, however the Kansas City Fed manufacturing index showed slower growth.

Here is a summary in graphs:

• Real GDP increased at 2.2% annual rate in Q1


Click on graph for larger image.

The GDP report was weaker than expected, however, on a positive note, final demand was decent. Personal consumption expenditures increased at a 2.9% annual rate in Q1, and residential investment increased at a 19.1% annual rate. Weather probably provided a boost to GDP - and PCE growth at this rate is not sustainable without more income growth - but this was still decent.

Residential Investment as a percent of GDP is still near record lows, but it is increasing. Usually RI bounces back quickly following a recession, but this time there is a wide bottom because of the excess supply of existing vacant housing units.

Last year the increase in RI was mostly from multifamily and home improvement investment. Now the increase is probably from most categories including single family. I'll break down Residential Investment (RI) into components after the GDP details are released this coming week.

• New Home Sales in March at 328,000 Annual Rate

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 328 thousand. This was down from a revised 353 thousand SAAR in February (revised up sharply from 313 thousand). December and January were revised up too.

This graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale was at a record low 48,000 units in March. The combined total of completed and under construction is at the lowest level since this series started.

Even though sales are still very low, new home sales have clearly bottomed. New home sales have averaged 335 thousand SAAR over the last 5 months, after averaging under 300 thousand for the previous 18 months. All of the recent revisions have been up too. This was a solid report and above the consensus forecast.

All current New Home Sales graphs
• Case Shiller: House Prices fall to new post-bubble lows in February NSA

S&P/Case-Shiller released the monthly Home Price Indices for February (a 3 month average of December, January and February).

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 34.2% from the peak, and up 0.2% in February (SA). The Composite 10 is at a new post bubble low Not Seasonally Adjusted.

The Composite 20 index is off 33.9% from the peak, and up 0.1% (SA) from January. The Composite 20 is also at a new post-bubble low NSA.

The second graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices increased (SA) in 12 of the 20 Case-Shiller cities in February seasonally adjusted (only 3 cities increased NSA). Prices in Las Vegas are off 61.7% from the peak, and prices in Dallas only off 8.2% from the peak.

The NSA indexes are at new post-bubble lows - and the NSA indexes will continue to decline in March (this report was for the three months ending in February).
All current house price graphs
• Real House Prices and Price-to-Rent Ratio at late '90s Levels

Case-Shiller, CoreLogic and others report nominal house prices. It is also useful to look at house prices in real terms (adjusted for inflation) and as a price-to-rent ratio.

This graph shows the quarterly Case-Shiller National Index SA (through Q4 2011), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through February) in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to Q4 1998 levels, the Composite 20 index is back to January 2000, and the CoreLogic index back to May 1999.

In real terms, all appreciation in the '00s is gone.

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to October 1998 levels, the Composite 20 index is back to February 2000 levels, and the CoreLogic index is back to June 1999.

In real terms - and as a price-to-rent ratio - prices are mostly back to late 1990s or early 2000 levels.
All current house price graphs
• ATA Trucking index Increased 0.2% in March

From ATA: ATA Truck Tonnage Index Up 0.2% in March

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index. The index is above the pre-recession level and up 2.7% year-over-year. More sluggish growth.

All current Transportation Graphs
• NMHC Apartment Survey: Market Conditions Tighten in Q1 2012


From the National Multi Housing Council (NMHC): Market Conditions Improve For Apartment Industry

This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tightening from the previous quarter. The index has indicated tighter market conditions for the last nine quarters and suggests falling vacancy rates and or rising rents.

This fits with the recent Reis data showing apartment vacancy rates fell in Q1 2012 to 4.9%, down from 5.2% in Q4 2011, and 9.0% at the end of 2009. This is the lowest vacancy rate in the Reis survey in over 10 years.

This survey indicates demand for apartments is still strong. And even though multifamily starts increased in 2011, completions of apartments were near record lows - so supply was constrained. There will be more completions in 2012, but it looks like another strong year for the apartment industry.

• Consumer Sentiment increases slightly in April to 76.4

The final Reuters / University of Michigan consumer sentiment index for April increased slightly to 76.4, up from the preliminary reading of 75.7, and up from the March reading of 76.2.

This was above the consensus forecast of 75.7. Overall sentiment is still fairly weak - probably due to a combination of the high unemployment rate, high gasoline prices and sluggish economy - however sentiment has rebounded from the decline last summer.

• Other Economic Stories ...
• NAR: Pending home sales index increased in March
• FOMC Statement: Economy "expanding moderately"
• FOMC Forecasts and Bernanke Press Conference

by Calculated Risk on 4/27/2012 11:05:00 PM

Just a reminder of why companies aren't investing more ... from Bruno Navarro at CNBC: Why Businesses Aren't Investing in the US: CEO

Businesses aren’t investing in the United States because of a lack of consumer demand, International Paper CEO John Faraci said Friday.

“I think this was all about consumer spending and demand. You know, the problem we have is there’s inadequate demand to create jobs. We know how to respond when there is demand,” he said ...

“Productivity has obviously been very good, so we’re creating more capacity with less resources. But at the end of the day, this is really about responding to demand, whether it’s automobiles or packaging products we make for a whole variety of industries and end users,”

It really isn't hard to understand [why certain companies aren't investing - these companies have adequate capacity to meet expected demand]. [added]

by Calculated Risk on 4/27/2012 09:20:00 PM

A tattered banker
Crawling along the desert
Deposits ... Cash ... Help!
by Soylent Green is People
From the FDIC: Pacific Premier Bank, Costa Mesa, California, Assumes All of the Deposits of Palm Desert National Bank, Palm Desert, California

As of December 31, 2011, Palm Desert National Bank had approximately $125.8 million in total assets and $122.8 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $20.1 million. ... Palm Desert National Bank is the 22nd FDIC-insured institution to fail in the nation this year, and the first in California.

That makes five today ... and we haven't seen a California bank fail since last September.

by Calculated Risk on 4/27/2012 06:28:00 PM

Harvesting Reaper
The merciless scythe wielded
Detritus voided
by Soylent Green is People
From the FDIC: FDIC Creates a Deposit Insurance National Bank of Eastern Shore to Protect Insured Depositors of Bank of the Eastern Shore, Cambridge, Maryland

As of December 31, 2011, Bank of the Eastern Shore had $166.7 million in total assets and $154.5 million in total deposits. ... The cost to the FDIC's Deposit Insurance Fund is estimated to be $41.8 million. Bank of the Eastern Shore is the 18th FDIC-insured institution to fail in the nation this year, and the first in Maryland.

From the FDIC: Sonabank, McLean, Virginia, Assumes All of the Deposits of HarVest Bank of Maryland, Gaithersburg, Maryland

As of December 31, 2011, HarVest Bank of Maryland had approximately $164.3 million in total assets and $145.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $17.2 million. ... HarVest Bank of Maryland is the 19th FDIC-insured institution to fail in the nation this year, and the second in Maryland.

From the FDIC: Great Southern Bank, Reeds Spring, Missouri, Assumes All of the Deposits of Inter Savings Bank, fsb D/B/A Interbank, fsb, Maple Grove, Minnesota

As of December 31, 2011, InterBank, fsb had approximately $481.6 million in total assets and $473.0 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $117.5 million. ... InterBank, fsb is the 20th FDIC-insured institution to fail in the nation this year, and the third in Minnesota.

From the FDIC: First Federal Bank, Charleston, South Carolina, Assumes All of the Deposits of Plantation Federal Bank, Pawleys Island, South Carolina

As of December 31, 2011, Plantation Federal Bank had approximately $486.4 million in total assets and $440.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $76.0 million. ... Plantation Federal Bank is the 21st FDIC-insured institution to fail in the nation this year, and the first in South Carolina.

Four down so far!

by Calculated Risk on 4/27/2012 03:03:00 PM

Earlier today from Nick Timiraos at the WSJ: Stunned Home Buyers Find the Bidding Wars Are Back

A new development is catching home buyers off guard as the spring sales season gets under way: Bidding wars are back.
...
From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today's are a result of supply shortages.
...
"We very much believe we've hit bottom," said Ivy Zelman, chief executive of a research firm, who was among the first to warn of a downturn seven years ago.
...
The Wall Street Journal's quarterly survey found that the inventory of homes listed for sale declined sharply in all 28 markets tracked. ...
Increased competition is frustrating buyers and their agents. "We're writing a record number of offers, but we're not seeing a record number of closings and that's because it's so competitive," said Glenn Kelman, chief executive of real-estate brokerage Redfin Corp. in Seattle with offices in 14 states.

Housing economist Tom Lawler sent me this comment on Timiraos' article:

The above [article] highlights a trend many realtors have been talking about – in many parts of the country homes listed for sale are not just receiving multiple offers, but are selling above list price. In many markets the “catalysts” for this “new” trend are sharply lower inventories of homes listed for sale; moderate increases in “traditional” home buying, spurred by low interest rates, rising rents, and a growing view that home prices may have finally stopped declining; and intense demand by investors for “distressed” properties they plan to rent out. Of course, the article cautions that housing markets face “headwinds” – still high (but much lower) REO inventories, still high (but somewhat lower) numbers of mortgages either seriously delinquent or in foreclosure, still lots of current homeowners “underwater,” and historically “sorta tough” mortgage lending standards. Still, the article is consistent with local realtor reports and other incoming data that home prices in many parts of the country are rebounding, and this trend should be reflected in many widely followed home price indexes a few months from now.

by Calculated Risk on 4/27/2012 12:11:00 PM

The GDP report was weaker than expected, however, on a positive note, final demand was decent. Personal consumption expenditures increased at a 2.9% annual rate in Q1, and residential investment increased at a 19.1% annual rate. Weather probably provided a boost to GDP - and PCE growth at this rate is not sustainable without more income growth - but this was still decent.

Investment in equipment and software slowed down to a 1.7% annual rate in Q1, but this slowdown is probably temporary. The largest quarterly contributions to GDP from equipment and software in this recovery have probably already happened, but I expect equipment investment to continue at a reasonable pace.

And investment in non-residential structures was negative in Q1. The details will be released next week, but this probably means investment in energy and power structures slowed in Q1 (this has been the main driver for non-residential structure investment over the last couple of years). However, based on the architecture billing index, I expect the drag from other non-residential categories (offices, malls) to end mid-year, so this negative contribution will probably end.

And there was another negative contribution from government spending at all levels. However, it appears the drag from state and local governments will end mid-year (after declining for almost 3 years).

A negative was that some of the increase in GDP was related to a positive contribution from changes in private inventories (this added 0.59 percentage points to Q1 GDP). This will probably be a drag for a quarter or two (swings in inventory are normal).

Overall this was a weak report, but it appears some of the drags will diminish over the course of the year - and that is a positive.

The following graph shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter centered average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

For the following graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Click on graph for larger image.

Residential Investment (RI) made a positive contribution to GDP in Q1 for the fourth consecutive quarter. Usually residential investment leads the economy, but that didn't happen this time because of the huge overhang of existing inventory, but now RI is contributing. Sure - some of the boost could be weather related, but RI has clearly bottomed.

The contribution from RI will probably continue to be sluggish compared to previous recoveries, but the ongoing positive contribution to GDP is a significant story.

Equipment and software investment has made a positive contribution to GDP for eleven straight quarters (it is coincident). However the contribution from equipment and software investment in Q1 was the weakest since the recovery started.

The contribution from nonresidential investment in structures was negative in Q1. Nonresidential investment in structures typically lags the recovery, however investment in energy and power has masked the ongoing weakness in office, mall and hotel investment (the underlying details will be released next week).

Residential Investment as a percent of GDP is still near record lows, but it is increasing. Usually RI bounces back quickly following a recession, but this time there is a wide bottom because of the excess supply of existing vacant housing units.

Last year the increase in RI was mostly from multifamily and home improvement investment. Now the increase is probably from most categories including single family. I'll break down Residential Investment (RI) into components after the GDP details are released this coming week. Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

The last graph shows non-residential investment in structures and equipment and software.

Equipment and software investment had been increasing sharply, however the growth slowed over the last two quarters.

Non-residential investment in structures decreased in Q1 and is still near record lows as a percent of GDP. The recent small increase has come from investment in energy and power. I'll add details for investment in offices, malls and hotels next week.

The key story is that residential investment is continuing to increase, and I expect this to continue all year (although the recovery in RI will be sluggish compared to previous recoveries). Since RI is the best leading indicator for the economy, this suggests no recession this year.

Earlier ...
• Real GDP increased 2.2% annual rate in Q1

by Calculated Risk on 4/27/2012 09:55:00 AM

Click on graph for larger image.

The final Reuters / University of Michigan consumer sentiment index for April increased slightly to 76.4, up from the preliminary reading of 75.7, and up from the March reading of 76.2.

This was above the consensus forecast of 75.7. Overall sentiment is still fairly weak - probably due to a combination of the high unemployment rate, high gasoline prices and sluggish economy - however sentiment has rebounded from the decline last summer.

by Calculated Risk on 4/27/2012 08:44:00 AM

From the BEA:

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 2.2 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the "advance" 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 (PCE), exports, private inventory investment, and residential fixed investment that were partly offset by negative contributions from federal government spending, nonresidential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the first quarter primarily reflected a deceleration in private inventory investment and a downturn in nonresidential fixed investment that were partly offset by accelerations in PCE and in exports.

Click on graph for larger image.

A few key numbers:
• Real personal consumption expenditures increased 2.9 percent in the first quarter, compared with an increase of 2.1 percent in the fourth.

• Investment growth slowed, except residential investment: "Real nonresidential fixed investment decreased 2.1 percent in the first quarter, in contrast to an increase of 5.2 percent in the fourth. Nonresidential structures decreased 12.0 percent, compared with a decrease of 0.9 percent. Equipment and software increased 1.7 percent, compared with an increase of 7.5 percent. Real residential fixed investment increased 19.1 percent, compared with an increase of 11.6 percent."

• Government spending continued to be a drag at all levels, but at a slower pace: "Real federal government consumption expenditures and gross investment decreased 5.6 percent in the first quarter, compared with a decrease of 6.9 percent in the fourth. ... Real state and local government consumption expenditures and gross investment decreased 1.2 percent, compared with a decrease of 2.2 percent."

This was below expectations. I'll have more on GDP later ...