The Economy

Posted on April 30, 2013 by The Weekly Commentary

There was some disappointing data released last week. First quarter real GDP only increased at a 2.5% annual rate, durable goods orders fell more than expected, and most of the manufacturing data (regional surveys, flash Purchasing Managers Index) were weak.

However, some of the underlying GDP details were decent (but not great). Final demand increased in Q1 as personal consumption expenditures (PCE) increased at a 3.2% annual rate (up from 1.8% in Q4 2012), and residential investment (RI) increased at a 12.6% annual rate (down from 17.6% in Q4). This was the strongest private domestic contribution (PCE and RI) since Q4 2010, and the 2nd strongest quarter since the recession began.

Unfortunately I expect PCE to slow over the next couple of quarters due to a combination of the payroll tax increase and the sequester budget cuts.

There was also some good news. The new home sales report for March indicated an ongoing recovery for housing, and the existing home sales report suggested an improving market (more conventional sales, fewer distressed sales). Also on housing, LPS reported that the number of non-current mortgages fell below 5 million for the first time since 2008.

Other good news included a drop in initial weekly unemployment claims, and increasing demand for architectural design services. This is a leading indicator for commercial real estate. (Source: Calculated Risk).

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