3 Numbers to Watch: UK GDP, US mortgages and house sales
• Upbeat outlook for UK recovery
• Weather still cited as negative factor in US
• US new homes sales disappoint
Today’s revised estimate of the UK's GDP for the fourth quarter of 2013 is the main event this morning. Later, two reports will provide another look at how winter has affected the housing market in the US via weekly mortgage applications and new home sales.
A few days ago, The Guardian asked: “Has the UK's economic recovery ended already?” There’s always room for scepticism when it comes to the consensus view for macro, but for the moment the numbers still favour cautious optimism for the UK. It could all change tomorrow, of course, but based on the published data to date there’s a strong case for arguing that the momentum is positive and will remain so for the near term. Today’s revised estimate of GDP is unlikely to conflict with this upbeat outlook.
Economists expect that the UK economy grew an encouraging 0.7 percent in the last three months of 2013 versus the previous quarter — the same pace that was reported in the preliminary Q4 2013 GDP report. A similar, perhaps slightly faster growth is expected for the near term, according to this month’s GDP estimate from the National Institute of Economic and Social Research (NIESR). Looking ahead to the full calendar year of 2014, NIESER projects that Britain’s economy will increase 2.5 percent, a moderate improvement over 2013’s 1.9 percent advance, as calculated by the Office for National Statistics.
Retail spending in the UK is reviving, according to recent data.
Photo: Dan Kitwood / Getty
Yes, there are several risk factors lurking. The hard data on retail sales has been wobbly lately, although a faster rate of wage growth in January suggests that consumption may pick up in the spring. In fact, that's the message that came out of yesterday's February release of the CBI Distributive Trades Survey, which shows that retail spending is reviving. Perhaps, then, it's no surprise that the European Commission yesterday juiced its estimate of UK GDP for this year to 2.5 percent, up slightly from its previous 2.2 percent forecast from last autumn.
In short, arguing that the UK's recovery is history at this point requires a rather hefty dose of speculation while ignoring the latest numbers.
February’s been a rough month for housing data, including the weekly updates on mortgage applications. In the last release, this gauge of demand for homes showed that new applications fell for the second week in a row. Weather is still widely seen as the source of the recent weakness. If so, today's release may show some improvement in the numbers for last week, which was relatively calm in terms of winter storms.
It doesn’t hurt that the interest rate for the benchmark fixed 30-year mortgage has been marginally lower in recent weeks. Some analysts, however, still warn that the housing market has peaked, even if the polar vortex can be blamed for the recent macro turbulence. But that's just a guess. This much is clear: until we sort out how or if the weather has played a role in the economic data of late, there’s plenty of room for debate about where the housing industry is headed this year.
On the bright side, Atlanta Federal Reserve president Dennis Lockhart anticipates progress in this sector. “I can still remain not effusively bullish on housing but believing there is still momentum in the housing sector, and we will have a decent picture when we look back at the end of the year,” he said last week. Today’s weekly report on mortgage applications will help the crowd to decide if that’s still a reasonable view.
Today’s January report on purchases of newly built homes is likely to tell us what was already clear in earlier reports: 2014 hasn’t been kind to property so far. The consensus forecast sees new home sales for last month dipping to a seasonally adjusted annual rate of 400,000, down from 414,000 in December. That's not horrible, but this release will be yet another instalment in a line of disappointing housing figures in recent weeks.
The positive spin is that buyers are merely delaying purchases. An economist at PNC Financial last week laid out the case for optimism. "Although higher mortgage rates and prices have reduced affordability somewhat, it is still much better than it was at the height of the housing boom. Many potential buyers concerned about their financial situation have put off purchases but are now looking to buy a home as the recovery has proceeded."
But today’s report on new sales for last month isn’t going to provide any insight on that theory. Rather, we’re still at the point of calculating the damage from the harsh winter. Deciding if the setback is temporary or an early sign of deeper trouble for housing (and the economy overall) will have to wait.
Source: US Census Bureau