Economy Watch: OEDC Up, FHFA Index Down

In its most recent economic outlook, the Organisation for Economic Development and Cooperation waxed fairly optimistic, but warned that the global crisis may not yet be through.

May 26, 2011
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user AMagill

The Organisation for Economic Development and Cooperation–the club formed by the world’s wealthiest economies–released its most recent economic outlook on the occasion of the 50th anniversary of the organization’s founding. On the whole, the report was fairly optimistic about the prospects of economic growth for the OEDC nations and worldwide, but it also said that “the global crisis may not be over yet.”

“Four such challenges stand out: dealing with high unemployment and preventing it from becoming entrenched; sustaining growth and avoiding stagnation; making progress in fiscal consolidation; and managing global imbalances while supporting orderly saving reallocation,” the report said, adding that “these challenges are interconnected and require a comprehensive and credible policy approach,” as if the record shows that such a thing is likely to happen.

Naturally, the OEDC is predicting that some countries will do better than others during 2011 and ’12. Surprisingly, perhaps, the U.S. isn’t at the bottom of the heap in terms of projected real GDP growth for this year and next, even if the hard-luck cases of Greece, Iceland, Ireland and Portugal aren’t considered. U.S. GDP is predicted to grow 2.6 percent and 3.1 percent, respectively, this year and next, trailing a few places, such as Chile (up 6.5 percent in ’11 and 5.1 percent in ’12); Israel (up 5.4 percent and 4.7 percent); and South Korea (up 4.6 percent and 4.5 percent). Yet U.S. growth will be roughly on par with that of Germany, Finland and Switzerland, and will best Japan, the UK and France, according to the OEDC.

FHFA House Price Index Dips During the First Quarter of 2011

The Federal Housing Finance Agency said on Wednesday that its index of U.S. house prices dropped 2.5 percent in the first quarter of 2011 compared with the previous quarter. The index was down 5.5 percent compared with the first quarter of 2010. The index measures sales prices of properties whose mortgages are insured or owned by Fannie Mae or Freddie Mac.

According to the FHFA, the largest quarter-over-quarter drop was in the Atlanta-Sandy Springs-Marietta metro area, down 13.5 percent. By contrast, metro Pittsburgh held onto its home valuations best between the quarters by managing to eke out a 0.2 percent gain.

“House prices in the first quarter declined in most parts of the country,” Edward DeMarco, acting director of the FHFA, said in a statement. “Foreclosures and other distressed properties are still a key factor. Fortunately, serious delinquency rates are also declining.”

The Big Show on Capitol Hill

House leadership said on Wednesday that they are bringing a debt ceiling bill to the floor of that chamber next week, one without any restrictions on future deficit spending–a “clean” bill in the odd parlance of Congress. The unstated purpose of the bill is for it to be defeated, so that the Congressmen who vote against it this time around can later say that they voted against it, thus mollifying the majority of their constituents who erroneously believe that such a vote is the same thing as voting to reduce federal spending.

Political theater, in other words. The question now is how seriously investors, especially holders of U.S. debt in other countries, will take this particular piece of theater. The real drop-dead deadline for default by the government, according to Treasury, is still Aug. 2.

Wall Street was moderately more cheerful on Wednesday than the day before, with the Dow Jones Industrial Average gaining 38.45 points, or 0.31 percent. The S&P 500 was up 0.32 percent and the Nasdaq advanced 0.55 percent.