The Economy Is Improving!!??

Check out the latest from the respected Economists of the National Association of Home Builders.


The Economy Is Improving, Or Is It?

The Commerce Department’s Bureau of Economic Analysis reported that real (inflation-adjusted) gross domestic product (GDP) fell 0.7% at a seasonally adjusted annual rate during the second quarter, an improvement from two earlier estimates indicating a 1.0% decline.

Meanwhile, various other economic data suggest that real GDP will increase in the third and fourth quarters.

Excluding motor vehicle and parts sales, this measure was up 1.0% in August and 0.5% in September and its has increased in four of the last five months — suggesting that consumers may be feeling a little better about making purchases.

More than 80% of the economists responding to the National Association for Business Economics forecast survey believe that the recession is now over, although they generally expect the recovery to be slower than usual.

Employment Takes Another Step Down

The September employment report was a bit of a surprise. Non-farm payroll employment was 263,000 at a seasonally adjusted annual rate, more than the 201,000 in August. Nonetheless, September’s drop was still an improvement over the June-through-August average loss of 323,000.

While it is normal for employment to lag the rest of the economy, job growth could prove to be sluggish in this recovery, putting a drag on the general economy and the housing sector, in particular.

Housing Continues to Struggle

Housing continues to be buffeted by multiple forces. A weak economy, dismal job market, foreclosures, fears of further declines in home values and tight credit conditions are among the factors weighing the housing market down.

Consumers Send Out Mixed Signals

While the University of Michigan’s consumer sentiment index rose to 73.5 in September from 65.7 in August, the Conference Board’s Consumer Confidence Index slipped from 54.5 in August to 53.1 in September.

On housing in particular, consumers’ views of the marketplace held steady in the Michigan survey, but there was slippage in the Conference Board’s assessment of consumer plans to buy a house over the next six months.

Have Housing Prices Stabilized?

The seasonally adjusted S&P/Case-Shiller 20-city and 10-city Home Price Indexes were both up in June (0.9% and 0.8%, respectively) and July (1.3% and 1.2%). Still, both are down on a year-over-year basis — by 12.8% and 13.3%, respectively.

What Lies Ahead for the Economy and Housing?

The economy does seem to be in the early phase of a recovery as government money from the stimulus package is just beginning to flow into the economy, sparking some spending. Early indications are that overall output is on the rise, even as some parts of the economy continue to shed jobs. Unfortunately, job losses are still outstripping job gains, resulting in a net loss of jobs, and the outlook is for further job losses into early next year.