Daily Forecast Update: GDP, Consumer Sentiment, Bernanke Confirmation

January 29, 2010

By Danielle Hale, Research Economist 

Daily Forecast Update

  • NAR’s monthly official forecast as of January 5th
  • GDP 2009 Q4: +5.7%
  • GDP 2010 Q1: +2.7%
  • GDP 2010 Q2: +2.4%
  • Unemployment rate by the mid-2010: 10.1%
  • Average 30-year fixed mortgage rate by mid-2010 2009: 5.6%

What does today’s data mean for REALTORS® and consumers?

  • Today’s data on the economy have reassured markets. The good news began with the Senate’s confirmation of Chairman Bernanke yesterday, and continued today with the GDP release and Consumer Sentiment.
  • Reported GDP growth of 5.7 percent exceeded economists’ expectations, is a significant improvement over the third quarter’s 2.2 percent growth, and marks the second consecutive quarter of growth after 4 consecutive quarters of decline. Continued growth will eventually lead to hiring.
  • Positive consumer expectations for the future and assessment of current conditions led to the highest reading on consumer sentiment in the past two years. Consumer responses to questions about their own situation suggest that they do not expect overall economic improvements to translate quickly into new hiring and additional income. Consumer expectations about their personal situation may translate into spending that is lower than in a typical recovery.

Today’s Data on GDP

  • The Bureau of Economic Analysis reported that GDP grew at an annualized rate of 5.7 percent in the fourth quarter 2009 from the third quarter. Inventory investment, increasing exports, and personal consumer spending led to GDP growth in the fourth quarter. As cash-for-clunker-motivated spending on durable goods phased out in the fourth quarter, consumer spending increased on non-durable goods and services.
  • Today’s estimate is the “advance” estimate, one that is issued on the basis of data that is incomplete or subject to revision. While over long periods of time, there is not consistent bias in advance estimates, recent revisions have been more notable. For example, GDP estimates for the third quarter of 2009 were revised down to 2.2 percent from the “advance” estimate of 3.5 percent growth.

Consumer Sentiment

  • Consumer sentiment rose in January to 74.4, its highest level in two years. Not only do expectations for the future remain high, the index for current economic conditions is at its highest level since March 2008.
  • While consumers are optimistic about the overall economy, the report indicated that expectations for their personal finances were not quite as rosy. Twice as many consumers reported income declines as increases.

Senate Confirms Bernanke – Thursday

  • The Senate voted yesterday afternoon to confirm Chairman Ben Bernanke to another term at the helm of the Federal Reserve.
  • Chairman Bernanke had come under fire for what some argued was the Fed’s role in causing the recent crisis, and some argued earlier in the week that his confirmation could be in doubt. Ultimately, his creative endeavors to combat the crisis, including the Fed’s purchase of mortgage backed securities to hold down mortgage interest rates, seem to have carried him through to another four-year term.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries

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