GDP worse, but consumption better. A lot of “buts” in the number.
GDP down 6.1%, Consumption up 2.2% Q/Q on an annualized basis..
Government Spending fell 3.9%. This contributed to a -0.81% decline in the current GDP number
Inventories accounted for a -2.79% of the decline while Net Trader added 1.99%. Consumption added 1.5% this quarter after a -2.99% and -2.75 decline in the previous 2 months. Gross Private Domestic Investment contributed to a -8.83% decline of the GDP. Within that sector Non Residential Structures declined 2.13% (not likely to rebound). The Equiptment and software contributed to a 2.55% decline (more likely to rebound) and Residential contributed to a 1.36% (not likely to rebound with supply of homes so high).
The 3rd decline in a row was the 1st time since 1975.
The mix in the numbers is what makes traders look at the future. If inventories are now in control, a decline next quarter will not occur. Investement is a big minus for the GDP this quarter. Within that component there is Residential and Non-Residential construction. With commercial real estate in the doldrums and the Residential supply still high, any rebound is unlikely going forward. Businesses can increase investment in equipment, however, with a more steady economy. Government is also a future contributor to GDP. It is unlikely that this component will be a decline in the near future.
Consumption which accounts for up to 70% of GDP is the wild card of course (and most important). Will unemployment stop its move higher? The weekly initial claims are not showing it? Will housing recover in the spring and spur on more trickle down spending? The mortgage application data today suggests a healthy real estate climate seems more a hope than reality (so far). These are the two most important problems facing the economy going forward and will need to rebound in order to truly rebound. If they don’t, the green shoots may wither away. Watch the weekly data in the spring.
US 1st quarter GDP due out at 8:30 AM
The US 1st quarter GDP will be released at 8:30 AM. The expectation is for a decline of 4.7% annualized for the quarter. Last quarter the annualized decline came in at -6.3%. This was the lowest level since the 1Q 1982.
The Consumption is expected to improve by 0.9% after two months of sharp declines. GDP Price Index is expected to rise by 1.8% for the quarter.
Mortgage Applications fall 18.1% in the current week
The Mortgage Application index fell by 18.1% this week, largely on the back of refinancings declining by 21.9%. The purchase index was not that great eiter as it fell by 0.6% for the current week. This is up from a 4.2% decline last week. Nevertheless, the purchase index is now down 3 straight weeks. The average rate on a 30 year mortgage fell to 4.62% from 4.72% last week. The low was reached in the March 27th week at 4.61%.
This is not good news for the economy/global economy. The spring will hopefully bring about a reduction of supply of homes. It will not happen with applications declining at all time lows. The so called Green shoots may die a quick death if housing does not improve in the spring.
Germany Cuts GDP Outlook
- Sees 2010 GDP at 0.5%
- Sees 2009 exports lower by 18.8%; up 0.9% in 2010 period
- Sees 2010 Imports down 10.9%; up 0.4% in 2010
- 2009 Avg unemployment at 3.72M; climbing to 4.62M in 2010
- German 2009 CPI at 0.3%; 2010 at 0.7%
- Still opposes additional economic stimulus measures
ECB’s Wellink on the Wires
ECB’s Wellink: Forcing banks to only lend domestically is bad
- Restoring confidence to both economy and financial system remains crucial
Swiss KOF Economic Barometer Released
The CHF KOF Economic Barometer came out at -1.86 up from the previous -1.65. A rise to -1.89 was forecast.
EUROZONE Consumer Confidence Released
The EU Consumer Confidence came out better than expected at -31 from the previous -34. A slight rise to -33 was forecast.
The EUR is firm across the board as this data helped boost the currency further against its counters. The EURUSD is currently at session highs at 1.3231.
ECB’s Mersch on the Wires
ECB’s Mersch: Impact of financial crisis far from over; recovery measures far from certain
- Must ensure stimulus measures are effective
- Risks to financial markets have intensified
- Short term solutions are incompatible with financial stability
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