Economy Watch: GDP Growth Turns Strong in 4Q

The Bureau of Economic Analysis reports that GDP went up 3.2 percent in 4Q13. The NAR's pending home sales index falls in December, in part due to disruptive weather.

The Bureau of Economic Analysis reported on Thursday that real U.S. gross domestic product increased at an annualized rate of 3.2 percent in the fourth quarter of 2013, according to its advance preliminary estimate. That was stronger than expected, and might point to stronger GDP growth in 2014.

The increase in real GDP in 4Q13 was largely because of positive contributions from personal consumption expenditures — people out buying things — exports, nonresidential fixed investment, private inventory investment — businesses out buying things — and state and local government spending, which has recovered from their post-recession slumps. These positives were partly offset by negative contributions from federal government spending and residential fixed investment, according to the BEA. Imports, which are a subtraction in the calculation of GDP, increased.

For all of 2013, real GDP increased 1.9 percent, says the BEA, compared with an increase of 2.8 percent in 2012. The main drag on GDP growth in 2013 turned out to be federal government austerity. Imports were also up during the year, which represented a subtraction from real GDP.

Pending Home Sales Drop in December

The National Association of Realtors said on Thursday that its Pending Home Sales Index fell to 92.4 in December from a downwardly revised 101.2 in November. In December 2012, the index was 101.3. The index, which is based on contracts signed but not closed, is at its lowest level since October 2011, when it came in at 92.2.

NAR chief economist Lawrence Yun said several factors are working against buyers, such as unusually disruptive weather across large parts of the country in December. Also, he noted in a statement, “home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice.”

Yun forecasts that total existing-home sales this year should hold close to 5.1 million. That’s essentially the same as 2013, but inventory remains limited in much of the country.

Initial Unemployment Claims See Uptick

The U.S. Department of Labor said on Thursday that for the week ending Jan. 25, initial unemployment claims were at an annualized 348,000, an increase of 19,000 from the previous week. The less volatile four-week moving average was 333,000, an increase of only 750 from the previous week.

Wall Street recovered some ground on Thursday, with the Dow Jones Industrial Average rising 109.82 points, or 0.7 percent. The S&P 500 was up 1.13 percent and the Nasdaq advanced 1.77 percent.