Macroeconomics Forecast

6 Pages 1488 Words

Macroeconomic Forecasts:
Federal Reserve
WorldBank.org
Mortgage Bankers Association
Indicators:
- Total Consumption
- Business Investment

A. Federal Reserve
Total Consumption
In the year 2002, the year drew to a close with the likelihood of the U.S. engaging in war with Iraq, businesses responded by holding off on making spending decisions. The U.S. economy (measured as gross domestic product, or GDP) expanded by a meager 1.3% in the fourth quarter of 2002 and 2.0% in the first quarter of 2003. With the announcement of the conclusion of major fighting in Iraq in April, the delayed business decisions were exercised; the economy expanded by a decent 3.1% in the second quarter and then surged to 8.2% in the third quarter, the strongest rate of growth in nearly 20 years. The U.S. economy continued its solid performance in the fourth quarter of 2003 and the first quarter of 2004, growing 4.1% and 3.9%, respectively. Real GDP in the first quarter of this year was 4.8% higher than a year earlier. Employment suffered three straight years
of declines, losing nearly 1.8 million jobs in 2001, 563,000 jobs in 2002, and Consumer spending is predicted to be a robust 4.0% this year and a solid 3.5% next year. This will contribute to light-vehicle sales rising to 16.8 million units in 2004 and 16.9 million units in 2005. One sector that is likely to take a step back over the next year and a half is housing. With long-term rates forecasted to increase by 58 basis points in 2004 and by an additional 63 basis point in 2005, housing starts fall slightly in 2004 to 1.83 million units and then decline to a level of 1.70 million in 2005. After rising by 7.5% in 2003, residential in-vestment is expected to rise 4.0% this year and then decline 1.1% in 2005. Consumer spending soared in December 2004, increasing nearly 1 percent in that month alone. Purchases of goods and services generally were robust, but the kicker came from a spike in auto sales,...