What Recovery? Part II

Standard & Poors/Case-Shiller have released their latest update on home prices in the 20 major markets and overall for the first quarter of 2011:

Data through March 2011 … show that the U.S. National Home Price Index declined by 4.2% in the first quarter of 2011, after having fallen 3.6% in the fourth quarter of 2010. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.

The following markets showed increases or remained the same: Phoenix, Detroit, Los Angeles, Washington, Atlanta, Dallas. The remainder showed decreases; some, e.g. Minneapolis, showed sharp decreases. The national index has reached a new, post-bubble low.

Don’t expect housing to contribute to a recovery any time soon.

The Chicago Purchasing Managers Index dropped significantly more than expected. May, April, and March were each lower than the prior month. The current index suggests a slowing economy and a neutral level of activity.

From the Consumer Metrics Institute:

The importance of the price deflater used by the BEA cannot be overstated. In calculating the “real” GDP the BEA continued to use an overall 1.9% annualized inflation rate, which is substantially lower than the inflation rates being reported by any of the BEA’s sister agencies. The mathematical implications of the deflater are simple: a lower deflater creates a higher “real” GDP reading. If April’s CPI-U (as reported by the Bureau of Labor Statistics) of 3.2% year-over-year inflation is used as the deflater, the reported 1.84% annualized growth rate shrinks to a 0.56% annualized rate, and the “real final sales of domestic products” is actually contracting at a 0.63% rate. If instead of the year-over-year CPI-U we were to use the annualized CPI-U from just the first quarter (5.7%), the “real” GDP would be shrinking at a 1.82% annualized rate, and the “real final sales of domestic products” would be contracting at a recession-like 3.01%.

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