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GDP numbers indicate U.S. economy hitting its stride

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WASHINGTON (1/31/14)--U.S. gross domestic product--which measures output produced in the U.S.--grew at a rate of 3.2% in the fourth quarter, down from the third quarter's 4.1% pace but in line with economists' predictions, according to data released Thursday by the Bureau of Economic Analysis.
 
The economy grew at a 1.9% pace across 2013, compared with a 2.8% rate in 2012. The last time the growth rate was above 3% annually was 2005, when it reached 3.4%. The Federal Reserve has forecast the economy will grow between 2.8% and 3.2% this year (The Wall Street Journal Jan. 30)
 
Strong spending by consumers and businesses and an increase in exports helped drive fourth-quarter growth and offset declines in the government and residential sectors. Imports--which decrease the GDP--rose in the fourth quarter, but they were offset by higher exports.
 
Personal consumption expenditures, which account for more than two-thirds of GDP, moved upward by 3.3%, the strongest increase in three years. Purchases of services and nondurable goods such clothing and footwear helped offset cutbacks in autos and household goods.
 
Real disposable income increased 0.8%, down from a 3% gain in the prior quarter. Since spending growth outpaced that of income, the saving rate fell from to 4.3% from 4.9% (Moody's Economy.com Jan. 30)
 
Businesses boosted spending by 3.8%, but growth was restrained by reduced inventory investment. Inventories remained elevated in the fourth quarter because businesses boosted their stockpiles in the prior three months.
 
Many companies are focusing on short-term projects or replacing existing equipment but aren't adding capacity, said Wells Fargo chief economist John Silvia ahead of the report.
Residential investment decreased by 9.8%. Colder weather may have slowed construction, economists said.
 
The price index for personal consumer expenditures--a measure of inflation--rose at a 0.7% annual rate in the fourth quarter--below the Fed's 2% annual target.

Interest rates ticked upwards in December, says FHFA

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WASHINGTON (1/31/14)--The Federal Housing Finance Agency (FHFA) reported that interest rates for both adjustable- and fixed-rate mortgage loans crept up slightly in December.
 
The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some adjustable-rate mortgage contracts, was 4.25%, based on loans closed in December--an increase of 0.03 points from November.
 
The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less increased six basis points to 4.54% in December. The rates are calculated from the FHFA's Monthly Interest Rate Survey of purchase-money mortgages. Interest rates are typically locked in 30-45 days before a loan is closed. Consequently, December data reflect market rates from mid-to-late November.
 
The effective interest rate was 4.40%, up two basis points from 4.38% in November. The effective interest rate accounts for the addition of initial fees and charges over the life of the mortgage.
 
The average loan amount for all loans was $277,600 in December--up $12,700 from $264,900 in November.