Monday, 27 February 2012

US economy gets boost from recovery in housing

Growth in the United States economy appears to have picked up pace again, thanks in part to a housing sector that appears to be finally seeing a sustained recovery.

The Commerce Department reported last month that real gross domestic product increased at an annual rate of 2.8 percent in the fourth quarter of last year, faster than the 1.8 percent rate in the prior quarter.

Among the contributors to the acceleration in growth was residential investment, which grew at a 10.9 percent rate in the fourth quarter compared to 1.3 percent in the third.

Data last week from the Federal Reserve Bank of Chicago showed that the US economy has continued to perform well at the start of this year. The Chicago Fed National Activity Index decreased from 0.54 in December to 0.22 in January but the three-month moving average increased from 0.06 in December to 0.14 in January, its highest level since March 2011. According to the Chicago Fed, this suggests that economic growth was slightly above its historical trend.

The economy is likely to continue to get a boost from the housing sector as data in recent weeks indicate that the recovery in housing has continued at the beginning of this year.

Housing starts rose 1.5 percent in January while building permits rose 0.7 percent.

Existing home sales jumped 4.3 percent in January to the highest level since May 2010.

Sales of new single-family homes slipped 0.9 percent in January to a 321,000-unit annual rate. However, that was still higher than the fourth quarter average of 318,000 units, which had been the highest quarterly rate since the second quarter of 2010.

Finally, the National Association of Home Builders/Wells Fargo housing market index rose to 29 in February from 25 in January. It was the fifth consecutive increase and brings the index to its highest level since May 2007.

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