Finance Column » Your Money This Week » No seat belt for this bumpy ride

No seat belt for this bumpy ride

By Mark Hamrick · Bankrate.com
Monday, April 22, 2013
Posted 5 am ET

This week, we'll get reminders of the turbulent times in which we live. And that's just the economy.

On Friday, the government is to release its initial estimate of economic growth in the first three months of this year. Many economists are looking for first-quarter gross domestic product rising at an annual rate of about 3 percent. U.S. growth virtually stalled out in the final quarter of 2012. Continuing this stop-start action, but perhaps to a lesser degree, the experts tell us that we'll see less growth in the current quarter. The recent slowing is blamed on two things:

  • The forced federal spending cuts which took effect March 1.
  • The expiration of the payroll tax cut at the beginning of the year.

Gus Faucher, senior economist with The PNC Financial Services Group, says growth may fall below 2 percent in the second quarter. "We've been bouncing around a lot," he says. Even so, he thinks 2 percent will be the growth trend for all of 2013.

Housing recovery continues

If you've been hearing where a certain home sells quickly, that occurrence appears to be the exception and not the rule. This week, two key reports are due on the housing market:

  • March existing home sales, Monday from the National Association of Realtors,
  • New home sales, Tuesday from the Commerce Department.

David Crowe, chief economist for the National Association of Home Builders, calls it a "modest-movement-forward kind of market." In other words, he's not jumping up and down with excitement. Nor are the builders that his group represents. "My builders aren't telling me that they're getting multiple bids on their homes. Buyers are still bargain-hunting and they're expecting a deal. Some of the buyers aren't able to qualify for a mortgage yet after they've shopped." Crowe says one-third of builders surveyed indicate that they've lost at least one sale because a home appraisal came in below the agreed-to sales price.

The case for a weaker economy

While there's been increased speculation the Federal Reserve might begin to taper its program of $85 billion in monthly asset purchases by the end of the year, a few experts are bearish on the economy. One of the more negative outlooks comes from Scott Anderson, chief economist with San Francisco-based Bank of the West.

You've heard about the recent sharp decline in gold prices? Anderson says falling commodity prices in general are a sign that global demand is sinking, foretelling a bigger economic slowdown than most people expect. Anderson says "we're in a real unbalanced recovery in the U.S. as well as globally." He says signs of deflation in wholesale prices will begin to filter through to the consumer level. Anderson says the nation's unemployment rate will be at 7.6 percent at year-end, unchanged from March as reported by the Labor Department earlier this month.

As a result of the tepid recovery he sees, Anderson says the Fed won't be in a position to begin pulling back on asset purchases this year. That means interest rates stay low, a positive for borrowers but lousy for savers.

This week in business history

With attentions recently focused on dramatic news coming out of Boston, it is noteworthy that the American journalism industry traces its roots to colonial times in the region. On April 24, 1704, The Boston News-Letter began publishing. It is credited as being the first continuously published newspaper in the colonies. Since then, the U.S. has been regarded as the standard bearer of freedom of the press. The printed newspaper business has seen a huge disruption in recent years by the free distribution of content afforded by the Internet.

Follow me on Twitter @hamrickisms.

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