September 26, 2020

Economic Growth Was Moderate in First Quarter

The Commerce Department said on Thursday that economic growth in the first quarter was only marginally below the 2.5 percent annual rate the government had estimated last month. The rate is still much faster than the 0.4 percent growth during the October-December quarter.

Most economists think growth is slowing to around a 2 percent annual rate in the April-June quarter as the economy adjusts to federal spending cuts, higher taxes and further global weakness. Still, many say the decline may not be as severe as once thought. The numbers have been buoyed by solid hiring, surging home prices and record stock gains, which should keep consumers spending.

Jennifer Lee, senior economist at BMO Capital Markets, said the small revision to first-quarter growth supported her view that the economy would grow a moderate 2.2 percent for the year, the same as last year.

Still, Ms. Lee expects growth to improve to 3.2 percent in 2014, as the job market accelerates and consumers grow more confident in the economy.

Employers have added an average of 208,000 jobs a month since November, well above the monthly average of 138,000 during the previous six months. And the government said on Thursday that weekly jobless aid applications had risen to 354,000, a level consistent with modest job gains.

In addition, the number of Americans who signed contracts to buy homes edged up in April to the highest level in three years. The increase points to growth in home sales in the coming months.

The National Association of Realtors said on Thursday that its seasonally adjusted index for pending home sales rose 0.3 percent to 106. That is the highest since April 2010, when a home buyer tax credit inflated sales.

Signed contracts have jumped 10.3 percent in the last 12 months. There is generally a one- to two-month lag between a signed contract and a completed sale.

Sales of previously occupied homes rose in April to a seasonally adjusted annual rate of 4.97 million, a 3 1/2 year high. Sales of newly homes also rose in April, to nearly a five-year high.

Still, the supply of homes on the market remained low and that could keep sales from accelerating later this year. The number of available homes for sale rose in April, the Realtors’ group said last week, but was still down 14 percent from a year earlier.

Fewer homes for sale may be holding back sales in tight markets in the West, like Las Vegas and Phoenix. In those cities, many homeowners still owe more on their mortgages than their homes are worth.

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