Economy Watch: Public Spending Contraction Dents GDP
- Apr 30, 2012
Overall growth for the U.S. economy was middling during the first quarter, with expansion coming in at a 2.2 percent annualized rate, according to the Bureau of Economic Analysis on Friday. The headline rate obscured some encouraging bits of news, however, such as the fact that the estimate might be revised upward (as indeed it was for the fourth quarter).
Also, the BEA reported that real personal consumption expenditures—people out shopping, that is—increased 2.9 percent in the first quarter, compared with an increase of 2.1 percent during the fourth. Much of that spending was for cars, with motor vehicle output adding 1.12 percentage points to the first-quarter change in real GDP after adding only 0.47 percentage points to the fourth-quarter change. Spending on nondurable goods was also up quarter-over-quarter, increasing 2.1 percent, and spending on services gained 1.2 percent for the quarter.
One of the drags on GDP growth, amounting to a kind of unannounced, unofficial austerity policy, was the drop in government spending. Real federal government expenditures and gross investment decreased 5.6 percent during the first quarter, according to the BEA, compared with a decrease of 6.9 percent in the fourth. Real state and local government expenditures and gross investment decreased 1.2 percent during 1Q12, compared with a decrease of 2.2 percent the quarter before.
Apartment markets continues to improve
The National Multi Housing Council reported last week in its Quarterly Survey of Apartment Market Conditions that things are still improving for the apartment industry. All four of the survey’s indexes were above 50 (indicating growth) for the eighth time in the last nine quarters: Market Tightness (74), Sales Volume (57), Equity Financing (62) and Debt Financing (65).
Nearly half (49 percent) of the survey’s respondents reported tighter markets–that is, lower vacancy rates or higher rents or both—compared to only 1 percent reporting looser markets (and where are those places?). Also, borrowing conditions continued to improve for the industry. Just 4 percent of the respondents believed conditions worsened from last quarter, compared to 34 percent who reported improving conditions. The survey represents the views of 91 CEOs and other senior executives of apartment-related companies nationwide.
“Market conditions improved across the board, even from the rather strong level of three months ago,” said NMHC chief economist Mark Obrinsky noted in a press statement. “Demand for apartment residences—and apartment properties—continues to grow. We anticipate this increasing further in the coming years.”
Consumer sentiment ekes out a gain
U.S. consumer sentiment was up a bit in April, according to the final Reuters/University of Michigan Consumer Sentiment Index for the month. The reading was 76.4, up from a March reading of 76.2, and the highest level in a year, since sentiment took an extended downward direction as the economy stalled in the spring and Congress flirted with a first-ever default for the United States in the summer.
The expectations index was up, but the current conditions index dropped. “Confidence remained largely unchanged at improved levels in April as consumers were still hopeful about future job gains despite disappointing recent developments,” noted the report.
Wall Street was feeling moderately chipper on Friday as well. The Dow Jones Industrial Average gained 23.69 points, or 0.18 percent, while the S&P 500 was up 0.24 percent and the Nasdaq advanced 0.61 percent.