Economy Watch: 1st-Quarter GDP Revised Downward; Most States See Coincident Indexes Rise; Car Sales Up

Real gross domestic product increased at an annualized rate of 1.8 percent in the first quarter of 2013, which represents a downward revision of the Bureau of Economic Analysis' previous estimate. In May, coincident indexes increased in 33 states. And the annualized sales rate for new cars is predicted

Real gross domestic product increased at an annualized rate of 1.8 percent in the first quarter of 2013, according to the third and final estimate by the Bureau of Economic Analysis, which was released on Wednesday. The figure represents downward revision of the bureau’s previous estimate, which was a healthier 2.4 percent. 

The revision in real GDP mainly reflected downward revisions in personal consumption expenditures, exports, and to nonresidential fixed investment—commercial real estate, mostly—that were partly offset by a downward revision to imports (which are a subtraction from GDP). While the final estimate is considerably better than the 0.4 percent annualized growth registered in fourth quarter of 2012, it was still less than economists had expected. 

The revision might ultimately have an impact on the tapering down of QE3. The Fed predicts that real GDP growth for 2013 will come in between 2.3 percent and 2.6 percent, and while that’s still possible, the recent revision makes it less likely. If the economy doesn’t manage to hit those numbers, the Fed has said it would re-think the timetable for ending its bond-buying, which is currently at a clip of $85 billion a month. 

Most States See Coincident Indexes Rise 

The Federal Reserve Bank of Philadelphia said on Wednesday that in May coincident indexes increased in 33 states, decreased in eight states, and remained stable in nine. Over the last three months, the metric was even better: the indexes increased in 43 states, decreased in five, and remained stable in two. 

States that registered the strongest increases in their coincident indexes over the three months ending in May included Maine, Michigan, New Jersey, New Hampshire, Oregon, Utah, Washington and West Virginia, all of which saw increases of more than 1 percent. Most of the rest of the states saw increases in the last three months, but Alaska, Kansas, Nevada, Wisconsin, and Wyoming experienced declines, with only Alaska down more than 1 percent. 

The Philly Fed calculates the indexes by combining four state-level indicators to summarize current economic conditions in a single statistic. The four variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price.

Car Sales Continue to Rise, which tracks the new car market, predicted on Wednesday that the annualized sales rate (seasonally adjusted) for new cars will be 15.7 million units in June, up from 15.3 million in May and up from 14.4 million in June 2012. That’s the highest rate in about six years, according to the company, with average incentive spending by dealers per unit also down by 0.6 percent from June 2012. 

Wall Street bounced upward more on Wednesday, with the Dow Jones Industrial Average gaining 149.83 points, or 1.02 percent. The S&P 500 advanced 0.96 percent and the Nasdaq was up 0.85 percent.