April 24, 2007
BLAME IT ON THE WEATHER
The initial estimate of GDP for the first quarter is schedule to arrive on Friday. The consensus forecast calls for a 2.0% annualized rise, according to TheStreet.com. That would mark a slowdown from 2.5% in last year's fourth quarter.
Still, 2.0% wouldn't be the end of the world. But after reading this morning's 8.4% slump in existing home sales for March, might there be a rationale for thinking that the economy's growth will be slower than the crowd thinks?
Indeed, the fall in real estate transactions last month brings the total home sales to its lowest since June 2003. The National Association of Realtors, which crunches the statistic, tried to put the best face on the news by blaming the weather on the slump. In addition, comparing this year's 1st quarter home sales to the year-earlier period paints a brighter picture.
“For the last couple months we’ve been expecting a weather ‘hit’ on home sales finalized in March," said David Lereah, NAR’s chief economist, in a press release that accompanied the numbers. "But looking at overall activity in the first quarter we see that existing home sales averaged 6.41 million – a figure that is moderately higher than the sales pace during the second half of 2006." He went on the note, “We also may be seeing some losses as a result of the subprime fallout. However, this is masking improved fundamentals in the housing market, with lower mortgage interest rates and motivated sellers."
But none of this sways another dismal scientist from embracing a gloomier view. "Though lower sales were widely expected to offset the unexpected strength of earlier months, the breadth and depth of this decline leaves little doubt that the housing sector remains in the doldrums with a turnaround not yet on the horizon," wrote David Resler, chief economist at Nomura Securities in New York, in a note to clients today.
Tomorrow brings updates on new home sales and durable goods, along with the Fed's perspective on the regional economies via its Beige Book report. Then on Thursday, there's another take on the latest weekly jobless claims. But the big news promises to come on Friday with the GDP number.
While we're waiting, here's how some of the relevant numbers stack up as we write. As the table below suggests, there's reason to think that adjusting expectations down carries some weight at the moment.
Posted by jp at April 24, 2007 12:13 PM
Blaming the weather on the slump! Surely you jest!
Posted by: pww at April 24, 2007 3:24 PM