The Bulls Strike Back on Wall Street
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Revised GDP data was released this morning showing a 3.1% growth rate, higher than the previously reported 2.8% and higher than the expected 2.9%. This signals that the U.S. economy is beginning to heat up again after a severe recession, in which 9.8% of workers found themselves unemployed. Wall Street opened up.
The Federal Reserve's second round of Quantitative Easing may be one catalyst, as they purchase up to $600 billion in Treasury securities to lower interest rates and increase the supply of funds within the economy. Already, the Fed's balance sheet has grown to record proportions and inflation hawks are concerned with the level of government spending. However, accelerating economic growth may be just what is needed to vindicate the Keynesian economists.
Yesterday, weekly unemployment claims came in lower than expected at 382,000. This signals a moderate level of job creation. The 4-week moving average also dipped slightly. The current level of claims matches a 2 1/2 year low.
Despite all the good news, there are still weak spots in the housing market, with disappointing home sales and home prices data coming through earlier in the week. The Obama Administration's plan to wind-down Fannie and Freddie appears to be doing nothing to improve expectations of a housing recovery for the next five years.
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Scott_Grigg 14 months ago
As you noted, the housing market remains weak and I think rising gas prices are going to hinder economic growth here as prices rise because of transportation costs. Should be an interesting summer.