In the News

Last week saw a busy slate of economic news, including a drop in new home sales, gains in consumer incomes and spending, encouraging near-term employment, and better-than-expected performance for fourth quarter GDP.

Real Estate

Sales of new single-family homes in February dipped to an annual rate of 440,000, marking a 3.3 drop from January’s revised rate of 455,000, and 1.1 percent dip from February 2013’s estimate of 445,000, the Census Bureau and the Department of Housing and Urban Development reported last week.

In terms of price, February’s median sales price of new homes sold in 2014 was $261,800, and the average sales price was $317,500. In terms of inventory, the estimated number of new homes for sale at the end of February was 189,000, representing a 5.2-month supply.

Overall, March’s performance represented a five-month low that many experts chalked up to bad weather, too-high prices and tight inventory.

“The trend in sales is flat,” Pantheon Macroeconomics chief economist Ian Shepherdson told the Wall Street Journal. “The upward trend of 2012 and early 2013 is gone.”

Personal Incomes and Spending

Personal incomes and spending for February both increased, according to last week’s report from the Bureau of Economic Analysis. Personal incomes grew $47.7 billion, or 0.3 percent, and disposable personal income (DPI; income after taxes) increased $42.3 billion, or 0.3 percent, while personal consumption expenditures (PCE) increased $30.8 billion, or 0.3 percent.

Personal outlays, which combine PCE, personal interest payments and personal current transfer payments, notched up $33.8 billion in February. Personal savings — DPI less personal outlays — grew to $544.5 billion in February, compared with $535.9 billion in January. The personal savings rate, which is personal saving as a percentage of DPI, hit 4.3 percent in February, which was slightly up from 4.2 percent in January.

Employment

Looking at near-term employment, first-time claims for unemployment insurance filed by the newly unemployed during the week ending March 22 dropped to 311,000, a decline of 10,000 claims from the prior week's revised figure of 321,000, according to last week’s figures from the Employment and Training Administration.

The four-week moving average, which is considered a more reliable gauge of recent employment activity, fell to 317,750, a similar drop of 9,500 claims from the preceding week’s revised average of 327,250, claims. Overall, the week’s performance marked a four-month low for initial jobless claims, and led some economists to speak in more encouraging terms about the job market.

“The rate of firing in the economy remains low, a positive for employment growth looking ahead to the second quarter,” said Neil Dutta, head of economics at Renaissance Macro Research, in an interview with MarketWatch.

Gross Domestic Product

The Bureau of Economic Analysis released its third estimate for fourth quarter 2013’s real gross domestic product, and the scores were slightly higher than expected. Real GDP (the output of goods and services produced by U.S. labor and property) grew at an annual rate of 2.6 percent, which was slightly higher than the previous 2.4 percent estimate.

The increase in Q4’s real GDP was attributed to gains in PCE, exports, and nonresidential fixed investments that were partly offset by negative contributions from federal government spending and residential fixed investment, the Bureau reported.

“The data suggests that the economy had slightly more momentum than previously thought before it was hit by extreme weather at the start of 2014,” Market chief economist Chris Williamson told USA Today.

Market watchers said key drivers for continued GDP growth in 2014 will be consumer spending, declining consumer debt and an improved housing market.

This week we can expect:

• Tuesday — February construction spending from the Census Bureau; March car and truck sales from the auto manufacturers.
• Wednesday — February factory orders from the Census Bureau.
• Thursday — Initial jobless claims for last week from the Employment and Training Administration; February trade balance from the Census Bureau and Bureau of Economic Analysis.
• Friday — March Unemployment rate, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistic.