GDP Contracts in Final Q1 Estimate, But Majority of Lenders Remain Optimistic


The nation’s real gross domestic product (GDP) declined at the annual rate of 0.2 percent for Q1, according to the Bureau of Economic Analysis (BEA)’s third and final estimate for the quarter released this week.

While the economy contracted in the final estimate, which is based on more complete source data than were available for the first two estimates, it was still an improvement over the second estimate of minus 0.7 percent released in May. In the third estimate for Q1, exports decreased less than previously estimated while personal consumptions and expenditures increased more than previously estimated, according to the BEA. In the fourth quarter last year, real GDP increased at an annual rate of 2.2 percent.

“The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from PCE, private inventory investment, and residential fixed investment,” the BEA said in its report.

According to Fannie Mae’s National Housing Survey for May 2015 released earlier this week, the majority of mortgage lenders (61 percent) believe that the economy is on the right track, while 29 percent said they believed it was on the wrong track.

“This sanguine view of the economy is held by mortgage lenders of all sizes, larger institutions, mid-sized institutions, and smaller institutions,” said Michael Neal, senior economist with the National Home Builders’ Association (NAHB).

While more than half of lenders said they thought the economy is on the right track, Neal said, “However, a greater proportion of mid-sized lenders reported this kind of optimism. Furthermore, while still holding optimistic views, a greater percentage of larger institutions than smaller institutions believe that the U.S. economy is on the ‘wrong track.’ Smaller lenders were more likely to be unsure of current economic conditions.”

Many consumers did not share the same sentiment regarding the economy as mortgage lenders – only 38 percent of consumers said they believe the U.S. economy is on the right track, compared with 52 percent who said they believe it is on the wrong track, according to Fannie Mae’s survey. But according to Neal, “Improving labor market conditions and income growth should help improve consumer moods.”


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