WASHINGTON (6/26/14)--Real gross domestic product (GDP) officially flopped in the first quarter with a 2.9% tumble, according to a second revision of the quarter by the U.S. Bureau of Economic Analysis, released Wednesday.
The agency's initial estimate was a 0.1% increase, followed last month by a revised 1% contraction.
"The first quarter was a disaster for the U.S. economy, as it contracted severely," said Scott Hoyt, Moody's analyst (
June 25). "Fortunately most of the decline was because of factors that were either temporary or onetime events."
The nearly 3% pull-back marked the largest drop since 2009 and the largest during a period of prolonged economic expansion since the tail end of World War II (
Hoyt said the drop was fueled by severe winter weather, the expiration of the U.S. emergency unemployment program, slower inventory accumulation and a temporary poor economic period overseas.
The lack of consumer spending also played a key role in the contraction, especially in health-related spending, which sank by $6.4 billion instead of swelling by $39.9 billion, as the government had anticipated.
Weak inventory investment and final sales totals also dragged down the economy in the first quarter.
Gross domestic income, another marker of the health of the economy, shrank 2.6% after a 2.6% jump in the fourth quarter of 2013.
Moving forward, as the second quarter comes to a close, the impact of these factors should fade and the economy should rebound, Hoyt said, adding that real GDP growth now hovers above 3%.
Many economists expect the economy to grow by 3.6% in the second quarter, according to
"Since the recovery began five years ago, real GDP has grown about 2% per year," Hoyt said. "Growth should accelerate to above 3% for the remainder of the year and through much of 2015. Although the economy hit a deep pothole in the first quarter, this outlook remains intact."
WASHINGTON (6/26/14)--Mortgage application activity continues to slide, as the Mortgage Bankers Association (MBA) reported in its weekly survey that its composite index slipped by 1% for the week ending June 20.
Within the overall index, purchase application activity has fallen seven out of the last nine weeks (
"Three full weeks into June and mortgage application activity is showing no signs of the significant rebound expected by most at the beginning of the year," said Gregory Bird, Moody's analyst (
), adding that purchase applications are historically low.
Averaged over the last four weeks, refinance activity was largely unchanged but fell 56% behind the pace seen last year at this time. Purchase applications dropped 2% over the past month and fell 16% year-over-year.
Refinance activity, which constituted 52% of all applications, declined 0.9% for the week.
As for mortgage rates, the 30-year fixed-rate fell 3 basis points (bp) to 4.33%, which is 13 points lower than last year at this time. Jumbo 30-year fixed-rate mortgage rates declined 4 bp to 4.28%, while the five-year adjustable rate mortgage rate climbed 3 points, ending the week at 3.23%, according to
Moody's further reported Wednesday that the MBA also announced that it has trimmed its purchase originations forecast for the year and lowered expectations for 2015.
Apparently, the weakness in the housing market is being driven by the absence of first-time homebuyers, with that segment making up only 27% of all buyers in May, according to a report by the National Association of Realtors released earlier this week (
Historically, first-time home buyers make up 40% of the market, the report said.