The US economy experienced disappointing data releases on Thursday, with weaker than expected economic growth and a steeper decline in home sales. Mortgage rates also inched higher, surpassing the 7% threshold, contributing to economic struggles under the weight of high interest rates. However, these indicators suggest a potential lowering of borrowing costs in the future.
Despite concerns about stagnating inflation, the latest GDP data showed a revision to lower inflation rates in the first quarter, boosting the possibility of rate cuts in 2024. While there are warning signs about the economic outlook, economist Oren Klachkin remains cautiously optimistic about the road ahead. Consumer spending, a significant factor in the US economy, was revised downward, suggesting a cooling economic expansion.
The housing market remains challenging, particularly for first-time buyers, with mortgage rates reaching heights not seen in the last decade. Pending home sales decreased significantly in April, indicating that tough borrowing costs are deterring buyers. However, the anticipated rate cut by the Federal Reserve later this year may lead to improved conditions in the housing market.
Weekly data on jobless benefits applications have been trending higher, though not yet concerning. Initial claims for jobless benefits increased slightly, with continuing claims also ticking higher. Despite the volatility of weekly jobless claims data, economists are closely watching these trends for any shifts in the job market. The stock market reacted negatively to the economic data, with the Dow, S&P 500, and Nasdaq Composite all closing lower on Thursday.
In conclusion, the US economy is facing challenges with disappointing economic data, high mortgage rates, and tough borrowing costs impacting consumer spending and home sales. However, there are signs of a potential easing of borrowing costs in the future, with optimism around a cooling economic expansion and the possibility of rate cuts in 2024. The housing market remains tough for buyers, but the anticipated rate cut by the Federal Reserve may lead to improved conditions. Overall, economists are cautiously optimistic about the economic outlook going forward.
