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Economic Activity

VIEWS: 4 PAGES: 2

  • pg 1
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          •                 •   •       •        •          •       •
                                Economic Activity
                                                                                                                              Percentage points
                                                                                                     a,b                      4 CONTRIBUTION TO PERCENT CHANGE IN REAL GDP c
                                        Real GDP and Components, 2006:IQ
                                        (Preliminary estimate)
                                                                                               Annualized
                                                                         Change,            percent change                    3
                                                                                                                                                 Personal                                           Last four quarters
                                                                         billions          Current      Four
                                                                         of 2000 $         quarter    quarters                                   consumption                                        2005:IVQ
                                                                                                                                                                                                    2006: IQ
                                        Real GDP                146.4                        5.3             3.6              2
                                         Personal consumption 101.3                          5.2             3.4                                                                          Exports
                                          Durables               53.4                       20.5             4.3
                                          Nondurables            32.8                        5.7             4.5                                                                                          Government
                                          Services               25.0                        2.2             2.6               1                                                                           spending
                                                                                                                                                              Residential
                                         Business fixed                                                                                                       investment
                                          investment             41.3                       13.1             8.7
                                            Equipment            35.4                       13.8            10.0              0
                                            Structures            7.0                       11.4             4.8                                Business fixed
                                                                                                                                                 investment                  Change in
                                         Residential investment   4.6                        3.0             5.9                                                            inventories
                                         Government spending 21.1                            4.3             2.2             –1
                                          National defense       11.3                        9.5             3.3
                                         Net exports            –14.7                         __              __
                                          Exports                42.6                       14.7             8.1
                                          Imports                57.2                       12.8             6.6             –2
                                         Change in business                                                                                                                                          Imports
                                          inventories            –5.6                         __                 __
                                                                                                                             –3




                                    Annualized quarterly percent change                                                      Millions of units                                                                  Thousands of units
                                    6                                                                                        2.0 HOUSING STARTS: SINGLE-UNIT                                                                  500
                                        REAL GDP AND BLUE CHIP FORECAST c,d
                                                                                                                                     AND MULTI-UNIT STRUCTURES c
                                                                                                                             1.9                                                                                              475
                                    5
                                                                                                   Final estimate            1.8                                                                                              450
                                                                                                   Preliminary estimate                                                         Single-unit structures
                                                                                                   Blue Chip forecast        1.7                                                                                              425
                                    4
                                                                                                    30-year average                       Multi-unit structures
                                                                                                                             1.6                                                                                              400

                                    3                                                                                        1.5                                                                                              375

                                                                                                                             1.4                                                                                              350
                                    2
                                                                                                                             1.3                                                                                              325

                                                                                                                             1.2                                                                                              300
                                    1
                                                                                                                             1.1                                                                                              275

                                    0                                                                                        1.0                                                                                              250
                                            IQ    IIQ       IIIQ   IVQ    IQ         IIQ          IIIQ     IVQ         IQ          2000        2001          2002           2003           2004          2005         2006
                                                        2005                               2006                       2007

                                        a. Chain-weighted data in billions of 2000 dollars.
                                        b. Components of real GDP need not add to the total because the total and all components are deflated using independent chain-weighted price indexes.
                                        c. Data are seasonally adjusted and annualized.
                                        d. Blue Chip panel of economists.
                                        SOURCES: U.S. Department of Commerce, Bureau of Economic Analysis; and Blue Chip Economic Indicators, May 10, 2005.

                                Real GDP increased at an annual rate                          real GDP in 2006:IQ. Personal con-                            in their April and May publications,
                                of 5.3% in 2006:IQ, according to                              sumption expenditures contributed                             Blue Chip forecasters predicted that
                                the preliminary estimate released by                          3.6 pp, compared to only 0.6 pp                               growth will slow in the remaining
                                the Commerce Department. This                                 in 2005:IVQ. Exports added 1.0 pp                             three quarters of 2006 to 3.4%, 3.0%,
                                was 0.5 percentage point (pp) higher                          more, bringing that component’s                               and 2.8%.
                                than the advance estimate of 4.8%.                            total contribution to 1.5 pp. The ex-                            The housing market is often seen
                                The upward revision resulted primar-                          ception was changes in private inven-                         as an early warning signal for the
                                ily from stronger exports and an                              tories, which subtracted 0.1 pp in                            economy. In this context, the sharp
                                increase in private inventory invest-                         2006:IQ after adding 1.9 pp the previ-                        fall in housing starts since the start of
                                ment, which was partly offset by a                            ous quarter.                                                  the year is disconcerting. Following
                                downward revision to personal con-                               GDP growth has topped 5.0% only                            6% declines in both February and
FRB Cleveland • June 2006




                                sumption expenditures. In 2005:IVQ,                           twice since the beginning of 2000.                            March, housing starts fell a further
                                real GDP increased 1.7%.                                      During that time, GDP averaged                                7.4% in April to the lowest level since
                                   Compared to the previous quarter,                          2.7%. Growth in 2006:IQ was 2.6 pp                            November 2004. Single-unit starts,
                                most components made significantly                            above that average and 2.1 pp above                           which accounted for 83% of total
                                higher contributions to the change in                         the 30-year average of 3.2%. However,                                     (continued on next page)
                                                 11
          •                 •   •          •       •        •          •
                                Economic Activity (cont.)
                                    Millions of units                                                      Millions of units   Millions of units
                                    8.0 SALES OF NEW AND EXISTING HOMES a                                               1.4    3.5 SALES OF EXISTING HOMES BY REGION a


                                    7.5                                                                                 1.3
                                                                                                                               3.0
                                                                        New home sales
                                    7.0                                                                                 1.2                                       South

                                                                                                                               2.5
                                    6.5                                                                                  1.1



                                    6.0                                                                                 1.0
                                                                                                                               2.0
                                                                                                                                            Midwest

                                    5.5                                                                                 0.9                                                  West
                                                                       Existing home sales                                     1.5
                                    5.0                                                                                 0.8
                                                                                                                                                      Northeast


                                    4.5                                                                                 0.7    1.0
                                          2000     2001         2002       2003          2004       2005       2006                  2000      2001           2002         2003        2004        2005   2006



                                    Thousands of dollars                                                                        Percent
                                    260 MEDIAN PRICES OF NEW AND EXISTING HOMES                                                 9 MORTGAGE RATES


                                    240
                                                                                                                                8
                                                                                                                                                      30-year fixed rate
                                    220
                                                                                                                                7
                                                                       New homes
                                    200

                                                                                                                                6
                                    180

                                                                                   Existing homes                               5
                                    160
                                                                                                                                                                              15-year fixed rate
                                                                                                                                            One-year adjustable rate
                                                                                                                                4
                                    140


                                    120                                                                                         3
                                          2000     2001         2002       2003          2004       2005       2006              2000         2001           2002          2003        2004        2005   2006


                                           a. Data are seasonally adjusted and annualized.
                                           SOURCES: U.S. Department of Commerce, Bureau of the Census; Federal Home Loan Mortgage Corporation; and National Association of Realtors.




                                starts, also reached a 17-month low.                            dropped considerably in February.                            sales. Prices of existing homes also
                                The volatile multi-unit starts dropped                          Existing home sales in April were                            rose in April, despite a drop in the
                                15% in April, but they remained                                 down 7% relative to August 2005 and                          number of units sold.
                                within 32,000 of the five-year average                          were at roughly the same level as in                            Over the past couple of years,
                                of 346,000 units.                                               December 2005. The South has been                            mortgage rates have gradually crept
                                   April starts were down 18.4% from                            the big contributor to the run-up in                         up. In April, a typical 30-year fixed rate
                                January, with single-family dwellings                           sales of existing homes since 2000.                          mortgage was 6.51%, up from 5.89% a
                                down 15.4% and multiple-unit struc-                             The more recent fall-off in existing                         year earlier. The 15-year fixed rate
                                tures down 30.4%. Although mild                                 home sales came in the South and                             also rose, to 6.16% from 5.44% a year
                                weather has been credited with the                              West, with the Midwest and North-                            earlier. The one-year adjustable rate
                                large number of starts in January, it is                        east holding fairly steady.                                  rose more rapidly; it stood at 5.62% in
                                difficult to imagine that all of the sub-                          Since 2000, home prices have                              April, up from 4.27% a year earlier.
FRB Cleveland • June 2006




                                sequent fall is catch-up after the                              trended up. Some of the surprising                           These higher mortgage rates may be
                                strong January figures.                                         numbers for new home sales                                   behind the flattening in home sales as
                                   New home sales for April recov-                              in April came from the rise in prices                        well as the deceleration in home-
                                ered to their January level, having                             relative to March, along with increasing                     price appreciation.

								
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