The second forecast for fourth-quarter gross domestic product (GDP) was relatively flat in this week’s second round of statistics. (iStock)
of Secondary estimate According to the U.S. Bureau of Economic Analysis (BEA), real gross domestic product (GDP) for the fourth quarter of 2023 has been revised downward slightly, in part because private inventory investment was lower than initially expected.
Real GDP grew at an annual rate of 3.2% in the October-December period, after increasing 4.9% in the third quarter of 2023, according to BEA preliminary estimates released on Wednesday.
The figure is slightly lower than BEA’s initial GDP estimate for the fourth quarter, which showed the economy grew at a rate of 3.3%, mainly reflecting strong consumer spending on goods and services. It also predicted that the economy would grow by 2%, exceeding the forecast that had predicted that growth would slow month-on-month.
Stronger-than-expected growth has pushed the U.S. Federal Reserve further away from lowering interest rates. Fed officials expect at least three rate cuts this year, with the central bank saying rates are expected to fall to 4.6%. Latest economic forecasts In its Summary of Economic Projections (SEP) it said:
But stronger-than-expected inflation and solid economic data in January give the Fed room to wait.
“The GDP data confirms the resilience of the domestic economy and suggests the Federal Reserve is more reluctant to cut interest rates this year,” said Max Slyusalczuk, CEO of A&D Mortgage. ” he said.
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Housing demand rate will decline
Regarding the housing market, the prolonged rate cut schedule is likely to limit the sharp decline in mortgage rates in the first half of this year. Interest rates fell from nearly 8% to the mid-6% range in December, and remained there until the end of February, when they rose to nearly 7%.
Interest rate reversals are critical to creating more affordability for buyers dealing with record home price increases. House prices in December rose 5.5% from the previous year, hitting a record high.
Fannie Mae expects mortgage rates to fall below 6% by the end of 2024 as the Fed lowers interest rates. This will be delayed if the timeline for these reductions is long. Slyusalchuk said homebuyers on the sidelines waiting for significant changes in interest rates before making a purchase should not do so.
“This means that home ownership will not become any more affordable in the near future,” Slyusalchuk said. “Therefore, for those who can find a home, homeownership remains a strong investment, and with housing fundamentals not changing significantly this year, there is no benefit to holding off on offers.”
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Upside risk of inflation
Inflation rose 3.1% in January, lower than the previous month’s 3.4% growth but above economists’ expectations for growth of less than 3%.While inflation is ‘moving in the right direction’, wars, supply chain disruptions and banking sector uncertainty persist could reverse progress According to Freddie Mac, towards achieving and maintaining the Federal Reserve’s 2% goal.
“These factors could result in a ‘higher for longer’ interest rate environment,” Freddie Mac said.
Additionally, strong consumer demand increases the upside risk of inflation as Americans are accustomed to paying more for goods and services and are less willing to resist price increases, according to Morning Consult. It is said that he is letting it happen. report.
“Fewer consumers are reporting price surprises, corresponding to lower price sensitivity and lower transactions compared to a year ago,” the report said. “Increased purchasing power is helping to boost demand for everything from restaurant purchases to homes and cars.”
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