Home Prices Rose 3.2% in 2nd Period,
But Quarterly Increase Was Flat
Second-Quarter GDP Revised Up
By DAMIAN PALETTA and JEFF BATER
August 30, 2007
WASHINGTON -- U.S. house prices appreciated 3.2% in the second quarter of 2007 from a year before, the Office of Federal Housing Enterprise Oversight reported Thursday.
Meanwhile, the U.S. economy was stronger during the spring than earlier estimated, the government said Thursday, revising the growth rate higher because business spending and exports were better than first thought.
Ofheo said prices rose only 0.1% in the second quarter from the first quarter, the lowest quarterly increase since 1994.
"House prices were basically flat in the second quarter despite tightening credit policies, rising foreclosure rates, and weakening buyer sentiment," Ofheo director James Lockhart said. "Significant price declines appear localized in areas with weak economies or where price increases were particularly dramatic during the housing boom."
Ofheo reported that housing markets were the strongest in western states. From the second quarter of 2006 to the second quarter of 2007, house prices rose on average 15.3% in Utah, 12.8% in Wyoming, 9.1% in Washington, and 9.1% in Montana.
But some other western states performed poorly.
On average, prices fell 1.5% in Nevada over 12 months, 1.4% in Michigan, 1.4% in California, and 1.0% in Massachusetts.
Ofheo's data are collected from mortgage purchases by Fannie Mae and Freddie Mac and therefore does not include jumbo loans, which are products those companies are not allowed to buy.
Ofheo said that of the 20 poorest performing markets, 18 were in Florida and California.
In total, 14 states saw price declines in the second quarter from the first quarter. The worst performing state for the quarter was Rhode Island, where average prices fell 1.74% from the first quarter to the second quarter.
GDP Revised Up
Gross domestic product rose at a seasonally adjusted 4.0% annual rate, the Commerce Department said in a new, revised estimate of GDP in the second quarter, which included the period April through June -- a time that came before credit anxieties bubbled up in the U.S. to send financial markets reeling.
It was the strongest quarterly rate of GDP growth since 4.8% during the first three months of 2006.
Originally, the government had estimated second-quarter 2007 GDP rose 3.4%. First-quarter 2007 GDP climbed 0.6%.
The Commerce Department data showed corporate profits strengthened in the second quarter. Profits after taxes grew by 5.4% to $1.154 trillion, after rising by 1.5% in the first quarter. Year over year, profits increased 3.5%.
Price inflation gauges were lowered in the government's revisions to the economic data.
Stronger business spending and overseas sales led to the upward revision to GDP, a measure of all goods and services produced in the economy. But the adjustment wasn't quite as high as Wall Street expected; the median estimate of 25 economists surveyed by Dow Jones Newswires was a 4.1% advance.
The report showed businesses increased inventories in the second quarter by $5.4 billion, adding 0.21 percentage point to GDP. Originally, Commerce estimated a $3.6 billion increase, a contribution of 0.15 percentage point to GDP. Businesses increased inventories by $100 million in the first quarter.
Trade gave the economy a bigger push than first estimated -- because U.S. exports were revised up, rising by a rate of 7.6% instead of the originally reported 6.4%. Imports fell 3.2%; originally, the decrease was seen at 2.6%.
The revised data showed trade added 1.42 percentage points to GDP in the second quarter. Originally, trade was seen contributing just 1.18 percentage points to GDP.
Businesses elevated spending more than previously thought. Outlays rose by 11.1% in April through June; originally, spending was estimated rising 8.1%. Business spending climbed 2.1% in the first quarter. Second-quarter investment in structures by business surged by 27.7%. Equipment and software increased 4.3%.
Consumer spending advanced by 1.4%, up from a previously reported 1.3% increase but below the first quarter's 3.7% climb. Consumer spending accounts for about 70% of economic activity. It contributed 1.03 percentage points to GDP in the second quarter; the original estimate was a contribution of 0.89 percentage point.
Durable-goods purchases increased 1.7% in April through June, above the previously reported 1.6% increase but below an 8.8% climb in the first quarter. Durable goods are expensive items designed to last at least three years, such as refrigerators.
Second-quarter nondurables spending fell by 0.3%. Services spending went 2.3% higher.
Residential fixed investment, which includes spending on housing, tumbled by 11.6% in the second quarter, a drop bigger than the previously reported 9.3% plunge. Housing fell 16.3% in the first quarter.
Real final sales of domestic product, which is GDP less the change in private inventories, climbed 3.7%, above the previously reported 3.2% increase and above a 1.3% rise in the first quarter.
Federal government spending increased by 5.9%, revised down from an initially estimated 6.7% advance. First-quarter spending fell 6.3%. State and local government outlays increased 3.0% April through June.
Revisions to inflation gauges within the report were generally lower.
The government's price index for personal consumption increased 4.2%, below the previously estimated 4.3% advance but above the first quarter's 3.5% increase. The PCE price gauge excluding food and energy rose 1.3%, below the previously estimated 1.4% advance and lower than the first quarter's 2.4% increase.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, went up 3.8%, below the previously estimated 3.9% advance and the same as the first quarter rate of increase. The chain-weighted GDP rose 2.7%, the same as previously estimated but below the first quarter's 4.2% increase.
Jobless Claims Increase
Te number of U.S. workers filing new claims for jobless benefits jumped last week to the highest level since April, indicating slower growth in employment.
Jobless claims rose 9,000 to 334,000 on a seasonally-adjusted basis in the week ended Aug. 25, the Labor Department said Thursday. Claims for the Aug. 18 week were revised to 325,000 from 322,000.
Wall Street forecasts had called for 2,000 decline last week to 320,000, according to a Dow Jones Newswires survey.
The four-week average -- which economists use to gauge underlying labor market trends -- rose 6,250 last week to 324,500. That's the fifth straight rise.
Investors are closely watching U.S. labor markets amid worries over credit availability triggered by problems in the mortgage market. As long as job growth remains strong, economists predict consumer spending will weather turbulence on Wall Street.
Nonfarm payrolls expanded by just 92,000 last month and the unemployment rate ticked up, though it remains low by historical standards. Thursday's claims figures, suggest the underlying trend is not as strong it was earlier in the year.
If labor markets and, in turn, consumption head lower it would intensify pressure on Federal Reserve officials to cut their main policy tool, the federal funds rate. Futures markets are pricing in multiple reductions in the fed funds rate starting next month to alleviate credit crunch worries and their potential economic effects. The Fed has already lowered the discount rate is charges banks that borrow directly from the Fed.
According to the Labor Department report Thursday, continuing claims for workers drawing unemployment benefits for more than a week rose 13,000 to 2,579,000 in the week ended Aug. 18, the latest week for which such data are available. That's the highest level since mid April.
The insured unemployment rate ticked up to 2.0% in the Aug. 18 week, from 1.9% in the prior week.
There were 15 states and territories reporting an increase in initial jobless claims for the Aug. 18 week, while 38 reported a decrease.
California had the biggest decrease, 3,983, thanks to fewer layoffs in transportation, communications, and public utilities industries. Michigan reported the sharpest increase, 3,254, due to layoffs in the automobile industries.
But Quarterly Increase Was Flat
Second-Quarter GDP Revised Up
By DAMIAN PALETTA and JEFF BATER
August 30, 2007
WASHINGTON -- U.S. house prices appreciated 3.2% in the second quarter of 2007 from a year before, the Office of Federal Housing Enterprise Oversight reported Thursday.
Meanwhile, the U.S. economy was stronger during the spring than earlier estimated, the government said Thursday, revising the growth rate higher because business spending and exports were better than first thought.
Ofheo said prices rose only 0.1% in the second quarter from the first quarter, the lowest quarterly increase since 1994.
"House prices were basically flat in the second quarter despite tightening credit policies, rising foreclosure rates, and weakening buyer sentiment," Ofheo director James Lockhart said. "Significant price declines appear localized in areas with weak economies or where price increases were particularly dramatic during the housing boom."
Ofheo reported that housing markets were the strongest in western states. From the second quarter of 2006 to the second quarter of 2007, house prices rose on average 15.3% in Utah, 12.8% in Wyoming, 9.1% in Washington, and 9.1% in Montana.
But some other western states performed poorly.
On average, prices fell 1.5% in Nevada over 12 months, 1.4% in Michigan, 1.4% in California, and 1.0% in Massachusetts.
Ofheo's data are collected from mortgage purchases by Fannie Mae and Freddie Mac and therefore does not include jumbo loans, which are products those companies are not allowed to buy.
Ofheo said that of the 20 poorest performing markets, 18 were in Florida and California.
In total, 14 states saw price declines in the second quarter from the first quarter. The worst performing state for the quarter was Rhode Island, where average prices fell 1.74% from the first quarter to the second quarter.
GDP Revised Up
Gross domestic product rose at a seasonally adjusted 4.0% annual rate, the Commerce Department said in a new, revised estimate of GDP in the second quarter, which included the period April through June -- a time that came before credit anxieties bubbled up in the U.S. to send financial markets reeling.
It was the strongest quarterly rate of GDP growth since 4.8% during the first three months of 2006.
Originally, the government had estimated second-quarter 2007 GDP rose 3.4%. First-quarter 2007 GDP climbed 0.6%.
The Commerce Department data showed corporate profits strengthened in the second quarter. Profits after taxes grew by 5.4% to $1.154 trillion, after rising by 1.5% in the first quarter. Year over year, profits increased 3.5%.
Price inflation gauges were lowered in the government's revisions to the economic data.
Stronger business spending and overseas sales led to the upward revision to GDP, a measure of all goods and services produced in the economy. But the adjustment wasn't quite as high as Wall Street expected; the median estimate of 25 economists surveyed by Dow Jones Newswires was a 4.1% advance.
The report showed businesses increased inventories in the second quarter by $5.4 billion, adding 0.21 percentage point to GDP. Originally, Commerce estimated a $3.6 billion increase, a contribution of 0.15 percentage point to GDP. Businesses increased inventories by $100 million in the first quarter.
Trade gave the economy a bigger push than first estimated -- because U.S. exports were revised up, rising by a rate of 7.6% instead of the originally reported 6.4%. Imports fell 3.2%; originally, the decrease was seen at 2.6%.
The revised data showed trade added 1.42 percentage points to GDP in the second quarter. Originally, trade was seen contributing just 1.18 percentage points to GDP.
Businesses elevated spending more than previously thought. Outlays rose by 11.1% in April through June; originally, spending was estimated rising 8.1%. Business spending climbed 2.1% in the first quarter. Second-quarter investment in structures by business surged by 27.7%. Equipment and software increased 4.3%.
Consumer spending advanced by 1.4%, up from a previously reported 1.3% increase but below the first quarter's 3.7% climb. Consumer spending accounts for about 70% of economic activity. It contributed 1.03 percentage points to GDP in the second quarter; the original estimate was a contribution of 0.89 percentage point.
Durable-goods purchases increased 1.7% in April through June, above the previously reported 1.6% increase but below an 8.8% climb in the first quarter. Durable goods are expensive items designed to last at least three years, such as refrigerators.
Second-quarter nondurables spending fell by 0.3%. Services spending went 2.3% higher.
Residential fixed investment, which includes spending on housing, tumbled by 11.6% in the second quarter, a drop bigger than the previously reported 9.3% plunge. Housing fell 16.3% in the first quarter.
Real final sales of domestic product, which is GDP less the change in private inventories, climbed 3.7%, above the previously reported 3.2% increase and above a 1.3% rise in the first quarter.
Federal government spending increased by 5.9%, revised down from an initially estimated 6.7% advance. First-quarter spending fell 6.3%. State and local government outlays increased 3.0% April through June.
Revisions to inflation gauges within the report were generally lower.
The government's price index for personal consumption increased 4.2%, below the previously estimated 4.3% advance but above the first quarter's 3.5% increase. The PCE price gauge excluding food and energy rose 1.3%, below the previously estimated 1.4% advance and lower than the first quarter's 2.4% increase.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, went up 3.8%, below the previously estimated 3.9% advance and the same as the first quarter rate of increase. The chain-weighted GDP rose 2.7%, the same as previously estimated but below the first quarter's 4.2% increase.
Jobless Claims Increase
Te number of U.S. workers filing new claims for jobless benefits jumped last week to the highest level since April, indicating slower growth in employment.
Jobless claims rose 9,000 to 334,000 on a seasonally-adjusted basis in the week ended Aug. 25, the Labor Department said Thursday. Claims for the Aug. 18 week were revised to 325,000 from 322,000.
Wall Street forecasts had called for 2,000 decline last week to 320,000, according to a Dow Jones Newswires survey.
The four-week average -- which economists use to gauge underlying labor market trends -- rose 6,250 last week to 324,500. That's the fifth straight rise.
Investors are closely watching U.S. labor markets amid worries over credit availability triggered by problems in the mortgage market. As long as job growth remains strong, economists predict consumer spending will weather turbulence on Wall Street.
Nonfarm payrolls expanded by just 92,000 last month and the unemployment rate ticked up, though it remains low by historical standards. Thursday's claims figures, suggest the underlying trend is not as strong it was earlier in the year.
If labor markets and, in turn, consumption head lower it would intensify pressure on Federal Reserve officials to cut their main policy tool, the federal funds rate. Futures markets are pricing in multiple reductions in the fed funds rate starting next month to alleviate credit crunch worries and their potential economic effects. The Fed has already lowered the discount rate is charges banks that borrow directly from the Fed.
According to the Labor Department report Thursday, continuing claims for workers drawing unemployment benefits for more than a week rose 13,000 to 2,579,000 in the week ended Aug. 18, the latest week for which such data are available. That's the highest level since mid April.
The insured unemployment rate ticked up to 2.0% in the Aug. 18 week, from 1.9% in the prior week.
There were 15 states and territories reporting an increase in initial jobless claims for the Aug. 18 week, while 38 reported a decrease.
California had the biggest decrease, 3,983, thanks to fewer layoffs in transportation, communications, and public utilities industries. Michigan reported the sharpest increase, 3,254, due to layoffs in the automobile industries.
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