Growth falls short of forecasts, weakness ahead

WASHINGTON Sat Apr 27, 2013 12:54am EDT

1 of 2. Crews load and unload consumer products at the Port of New Orleans along the Mississippi River in New Orleans, Louisiana June 23, 2010.

Credit: Reuters/Sean Gardner

WASHINGTON (Reuters) - Home prices rose in February at their fastest annual rate in almost seven years, a fresh sign the housing market recovery will help counter the drag on the economy from government belt tightening.

The S&P/Case Shiller index of 20 metropolitan areas showed single-family home prices rose 9.3 percent in February from a year earlier, according to a report released on Tuesday.

The data reinforces the view that rising home prices could make Americans feel better about spending this year, helping counter a hit to economic growth from tax hikes and government spending cuts. That hit is already being felt.

"The steady rise in home prices reinforces the current narrative of continued progress in the housing market," said Millan Mulraine, an economist at TD Securities in New York.

Other recent data has pointed to less steam building in the housing market, but rising prices should give construction firms more incentive to build new homes and increase inventories. A dearth of homes on the market has been a recent factor holding back sales.

The S&P/Case Shiller index showed prices gained 1.2 percent in February on a seasonally adjusted basis from January, topping forecasts for a 0.9 percent gain.

Following a spectacular collapse that fueled the 2007-09 recession, the housing sector appears to have turn a corner and adjusted prices have been rising since February 2012.

Major stock indexes were lower in early trade.

A separate report showed labor costs rose less than expected in the first quarter and pointed to benign wage inflation, a potential sign the Federal Reserve has space to continue its monetary stimulus program.

The Employment Cost Index increased 0.3 percent in the first quarter, the Labor Department said on Tuesday. However, the data may have been distorted by an error found in benefits data for sales and office workers, the department said.

Workers' benefits rose 0.1 percent during the quarter, the slowest pace since 1999. A Labor Department analyst said the data error probably did not have a major impact on that series. The department said benefits data for sales and office jobs had been left out of the calculations for the increase in overall benefits.

Analysts polled by Reuters had expected a 0.5 percent increase in overall labor costs. In the 12 months through March, compensation costs advanced 1.8 percent.

Fed policymakers on Tuesday begin a two-day meeting on monetary policy, with results scheduled to be announced on Wednesday. A recent slew of weak growth data has raised expectations the Federal Reserve will keep its pace of bond buying at $85 billion a month.

The Fed has kept overnight interest rates near zero since late 2008 and it has tripled its balance sheet to about $3 trillion through purchases of securities, which are aimed at pushing longer-term borrowing costs lower.

Wages and salaries, which account for 70 percent of employment costs, increased 0.5 percent in the first quarter, up from a 0.3 percent gain in the fourth quarter.

They were up 1.6 percent in the 12 months through March.

(Reporting by Jason Lange in Washington and Leah Schnurr in New York; Editing by Neil Stempleman)

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Comments (3)
MikeBarnett wrote:
The US economy grew at 2.5% as consumer spending rose 3.2%, but it ignores the cold weather that caused heating bills to rise with increased use and a 4.4% rise in natural gas prices. In addition, gasoline rose 7.5% for workers or job seekers who drove. These factors caused the reported 3.2% rise in spending and the 5.3% cut in savings. These actions shift more money from the 99% who use heat and gasoline to the 1% who own the producing companies.

The 1% will not eat 200-300 eggs for breakfast, wear 100 suits, or drive 100 cars to work. The 1% will not spend enough money in enough stores and businesses to drive the US economy. The 99% are forced to use their resources for heat, fuel, and food. That situation leaves the US in economic distress and pushes the US closer to a third world division of wealth and standard of living with each passing year.

My partners and I do not recommend investments in the US at this time.

Apr 27, 2013 2:34pm EDT  --  Report as abuse
MikeBarnett wrote:
I omitted the paragraph about the Sequester and rising taxes.

Rising government layoffs will reduce spending for former employees, reduce payroll tax collections, and increase unemployment compensation payments, so there is one positive and two negative aspects initially. The secondary negatives are reduced spending from laid off workers and government purchases, reduced business profits from that spending, reduced taxes from those reduced profits, rising business layoffs, reduced private worker taxes, and increased private unemployment compensation. Rising taxes will reduce private purchases, profits, business tax revenues, and worker tax revenues, but it will raise government spending on unemployment compensation. On balance, the sequester and rising taxes will cost the government and the economy more than it saves.

This supports the conclusion that we do not recommend investments in the US at this time.

Apr 27, 2013 3:15pm EDT  --  Report as abuse
petejury wrote:
In order to counteract the effects of the ongoing crisis, maybe it’s time politicians and administrators took advice from professional economic crisis specialists with a proven track record of positive results. For example, the Orlando Bisegna Index, specialists in the economic crisis, have developed a program that has helped various counties with debt problems, business failures and unemployment, thus improving the economic condition of many families. The program has arisen from their development of the Orlando Bisegna Index, a unique index based on 206 diverse indicators that measures the intensity of the economic crisis in the G20 countries and other Euro countries. Given that none of the policies adopted so far seem to be working, a fresh approach to the situation could do no harm…

Apr 28, 2013 12:45pm EDT  --  Report as abuse
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