Weak consumer confidence and a disappointing lack of significant growth in durable goods sales are pointing to a weakening American economy. Durable goods sales rose just 0.8% in March after a 3.1% decline in February; despite expectations of a growth rate twice that. Core durable goods growth actually fell 0.2% after falling in February, although analysts had expected moderate growth.
Economic analysts are beginning to call the real estate market a “panic” as home sales continue to fall but prices keep rising. New home sales fell by an annualized 511,000 units in March, the third straight month of declines. New home sales have not fallen for three weeks in a row since 2011.
Mixed data on housing surfaced this week as existing home sales saw a surprising upstart even as weak new home buying caused fear about homebuilders’ long-term profitability. Existing home sales rose by 5.1% in March, according to a new study by the National Association of Realtor (NAR). The NAR said higher activity in the Northeast and Midwest, historically weak regions after the 2009 Global Financial Crisis, helped drive overall sales higher.
As the Federal Reserve continues to see weakening GDP growth, a new report from Bloomberg News suggests a hidden recession signal for the United States. The Atlanta Federal Reserve’s GDPNow calculation, which uses large data sets to make real time GDP predictions, sees just 0.3% GDP growth in the first quarter of 2016, far below many analysts and economists’ expectations.
The Federal Reserve highlighted a decline in real residential investment growth from a Census Bureau study, which saw just 8.5% growth versus previous 9% projections.
The US presidential selection process is well underway, and yet there has been no coherent discussion of fiscal policy. In part, this is because it does not appear particularly urgent. The US deficit peaked in 2009 at 10.1% of GDP. Last year it stood at what for most OECD countries an enviable 2.6%. This year and next, it is forecast by private sector economists to reach 2.9%.
Further worries about the economy are coming from the Federal Reserve as homebuilders’ expectations drop. According to a new study by the National Association of Homebuilders, firms see little signs of renewed strength in demand for new homes as prices continue to skyrocket and wages stagnate.
The NAHB’s Housing Market Index (HMI) remained at 58 for the third month in a row, despite expectations of an increase, leading to a “cautiously optimistic” outlook for construction growth this year, according to NAHB Chief Economist Robert Dietz.
Fighting increasingly worrying data about the American economy, the Federal Reserve has made a plea to the world to remain calm. A historically unprecedented presentation by the last four Federal Reserve chairmen—Janet Yellen, Ben Bernanke, Alan Greenspan, and Paul Volcker—focused on how the economy remains on a “solid course,” despite increasing evidence that a recession might be looming.
The phrase comes from standing Chair Yellen, who added that the U.S. has made “tremendous progress” from the financial crisis of 2008.
In another sign of slow growth and weak demand, mortgage rates fell to their lowest point this year as Treasury yields fell to almost their lowest rate in history. U.S. Treasuries fell to less than 1.7% during Thursday trading, nearing the all-time low achieved earlier this year of 1.64%.
The Federal Reserve has fully reversed course, indicating that interest rate increases are likely to come later rather than sooner, as weak economic growth plagues the United States. Recently released Federal Open Market Committee (FOMC) minutes point to the central bank’s hesitance to raise borrowing costs for Americans due to protracted weakness throughout the broad economy.
The Federal Reserve has again cut its growth outlook for the American economy as multiple signs of weakness come from numerous independent reports. The Atlanta Federal Reserve’s GDPNow cut its outlook to 0.4% growth in the first quarter of 2016, the third cut that has seen growth expectations more than halve. That is far below economists’ consensus expectations of 1.9% growth, and is indicative of the GDPNow model’s reliance on real-time data and larger data sets.
