Economy Shrank 2.9 Percent In First Quarter Of 2014: Steepest Decline Since Great Recession by DAILY MAIL | JUNE 25, 2014
• Most economists aren't worried about the dip and see it as a temporary contraction because of the harsh weather • Healthcare spending shrank 0.2percent as Obamacare of implemented • Experts predict 3percent growth for the second-half of the year Americans went into hibernation during the bitter polar vortex winter this year - and the U.S. economy slumbered along with them, dropping a stunning 2.9percent in the first quarter of 2014. The sharp drop from January through March is the biggest dip since the Great Recession shaved 5.4percent off the Gross Domestic Product five years ago. It is one of the biggest contractions outside of a recession is recent history. Economists believe most of the contraction was the result of a short-lived slowdown in spending due to an abnormally long and and harsh winter that disrupted shipping, shut down factories and kept consumers away from shopping malls and auto dealerships. The first-quarter contraction reported Wednesday by the Commerce Department was even more severe than the 1 percent annual decline it had estimated a month ago. Besides the harsh winter, much of the downward revision reflected a drop in health care spending. Another factor was a bigger trade deficit than initially estimated.
Drop: The economy shrank by a stunning 2.9percent in January through March of this year - thanks largely to a terrible winter Most analysts also foresee the economy expanding at a healthy rate of around 3 percent in the second half of this year. Reports on consumer spending, manufacturing and business investment have shown a solid rebound this spring. Orders for big-ticket manufactured goods excluding military hardware and for core capital goods, a proxy for business investment, rose strongly in May, a report Wednesday showed. 'We have ample evidence that the first quarter was just a temporary setback for the economy, and we are climbing out of the hole in the current quarter,' said Stuart Hoffman, chief economist at PNC Financial. Last quarter's 2.9 percent annual decline in economic activity, as measured by the gross domestic product, followed a 2.6 percent gain in the fourth quarter. It was the weakest showing since the economy shrank at a 5.4 percent annual rate in the first quarter of 2009 in the midst of the Great Recession. Most of the downward revision from the government's previous estimate of a 1 percent annual decline reflected a change in the estimate of spending on health care. The government had previously estimated a strong gain in this category reflecting implantation of provisions of the Affordable Care Act. But data derived from an actual survey showed the government's estimate was far too optimistic. Health care spending, instead of rising at a 1 percent rate, had fallen in the first quarter at a 0.2 percent rate.
A long, nasty winter kept many shopper home, shut down factories and derailed deliveries in the first quarter of 2014 Analysts say solid hiring, growth in manufacturing and surging auto sales are contributing to a stronger economy. A stumbling housing recovery has been a concern. But even there, recent data on home sales and construction have been encouraging. 'The larger contraction in GDP in the first quarter is not a sign that the US is suffering from a
fundamental slowdown,' said Paul Dales, senior U.S. economist at Capital Economics. If economists are correct that annual growth will reach around 3 percent in the second half of the year, it would be a sharp improvement from the 2 percent annual pace of the first five years of this subpar economic recovery. 'We should have a much better second half this year and a much better 2015 than 2014,' said Mark Zandi, chief economist at Moody's Analytics. Zandi said he's forecasting growth of 3.5 percent to 4 percent in 2015. If he's correct, that would be the strongest year since the economy grew 3.8 percent in 2004. 'In past recoveries, we have always gotten a year of very strong growth,' Zandi said. 'I think we will get that in 2015,' helped by a long-awaited improvement in wage growth. Of course, the optimistic projections could prove too rosy. Analysts see risks to their forecasts, primarily the possibility that tensions in the Middle East could cause oil prices to surge given the deteriorating crisis in Iraq. Surging energy prices have preceded earlier economic slowdowns, including the most recent recession.
Stocks Close Sharply Lower, Dow Drops 119 Points by ED BRACKETT| USA TODAY | JUNE 24, 2014
Stocks gave up early gains and closed sharply lower Tuesday as the major indexes pulled back from near record levels. The Dow Jones industrial average fell 119.13 points, or 0.7%, to 16,818.13. The blue-chip index is down from its record closing high of 16,947.08 set Friday. The Standard & Poor's 500 index dropped 12.63 points, or 0.6%, to 1949.98 and the Nasdaq composite index fell 18.32 points, or 0.4%, to 4350.36. Traders said the selling might be tied to large mutual funds having to rebalance their portfolios ahead of the end of the quarter next week. Other traders pointed to the ongoing violence in Iraq as a reason to pull out of the market ahead of the end of the quarter. Investors were also slicing and dicing the latest batch of economic reports, which paint complex pictures of the housing market while showing consumer confidence at a six-year high. Looming: The prospect that the government will announce Wednesday that the economy shrank in the first quarter even more than the minus 1% figure given out last month. But economists are laying the blame on the Arctic chill that gripped much of the U.S. then. NEW HOME SALES: Surge 18.6%, top forecasts CONSUMER CONFIDENCE: Hits 6-year high CASE-SHILLER: Home prices' annual growth rate falls "We had a very bad first quarter, but the first quarter is history," Craig Alexander, chief economist at TD Bank, told the Associated Press. "It doesn't tell you where the economy is going, which is in a direction of more strength."
The latest economic data seemed to bolster that argument and provided an early lift to stocks that evaporated in late trading. Confidence hit a new post recession high this month as surging stock prices and strong job growth lifted Americans' outlook, the Conference Board's consumer confidence index showed. New home sales last month blew past forecasts to their strongest pace in six years, the Census Bureau reported. Home prices rose in April, the Standard & Poor's/Case-Shiller 20-city index showed, but annual gains continued to fall from previous months in a trend that many experts say should help buyers as the economy improves. Bond prices jumped, which sent the yield on the 10-year Treasury note lower, as it fell to 2.58% from 2.63% on Monday. Overseas, Japan's Nikkei 225 index added 0.1% to close at 15, 376. 24. in Europe, Britain's FTSE 100 index ended down 0.2% to 6787.07. In Germany, the DAX climbed 0.2% to settle at 9938.08 and the CAC 40 in France gained 0.1% to finish at 4518.34. On Monday, the S&P 500 fell 0.1% to 1,962.61 while the Dow also dropped 0.1% to 16,937.26. The Nasdaq was practically unchanged at 4,368.68. The price of U.S. benchmark crude for August delivery dipped 0.1% to $106 a barrel in electronic trading on the New York Mercantile Exchange.
New Home Sales Report: Not Believable by IRD | JUNE 25, 2014 The new home sales number reported today by the Government’s Census Bureau with “seasonal adjustments” is simply not believable. If you look at this link and scroll down to the “Not adjusted” section, you’ll see TOTAL of 9,000 more homes nationwide were sold in May vs. April: May New Home Sales According To The Census Bureau Furthermore, you’ll see the average sales price soared nearly 5%. This is not consistent at all with past data correlations when rising prices curtail sales. Finally, we know that 93% of all new home buyers use a mortgage to buy a new home. New home sales are based on contract signings, When a contract is signed, the buyer then applies for a purchase mortgage. Purchase mortgage applications plunged in May. New home sales data is compiled and reported by the Govt’s Census Bureau. Like all other Govt reports, this one is simply not believable.
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