Providing further evidence of the U.S. economy’s slowing momentum, federal officials on Thursday revised first-quarter gross domestic product growth upward by a lower-than-expected amount.
The slightly disappointing GDP data, combined with a separate report that showed a continuing decline in existing-home sales in the wake of higher mortgage rates, may play a role in the Federal Reserve’s pending decision on whether to pause in its long series of interest-rate hikes.
A month ago, the Commerce Department originally reported that the nation’s economy expanded at a vigorous 4.8 percent annual rate in the first quarter, the strongest quarterly performance in 2 1/2 years.
The initial “advance” measure of the nation’s quarterly GDP is routinely revised later, however, as more-precise statistics become available. Most experts thought the revision would show first-quarter growth at an even-more-robust 5.8 percent rate.
Instead, the revised figures the government released Thursday showed a more modest rise, to 5.3 percent.
The revision procedures are fairly technical, having to do with refining the data on investment trends, currency translation, corporate profits and a host of other largely arcane issues. There was some evidence that consumer spending was slightly softer than first estimated, but in general, economists found little in Thursday’s report that altered their fundamental view that the economy is set for a slowdown in growth during the rest of 2006.
“None of these revisions are likely to have much impact on estimates of second-quarter growth, which we still estimate to be growing at a 3.1 percent annual rate,” said Nomura economist David Resler.
Also Thursday, the National Association of Realtors reported that April sales of previously owned single-family homes and condos dropped 2 percent from March, to an annual rate of 6.76 million units.
In recent years, extremely low interest rates spurred an increase in home sales and pushed home prices dramatically higher. But the Fed’s nearly two-year campaign of slowly but steadily raising rates has taken the wind out of the market.
In April, the Realtor group said, house-price appreciation continued to slow: The year-over-year increase in the median price of a home rose a modest 4.2 percent, the smallest such gain since September 2001.
In Illinois and the Midwest in general, sales of existing single-family homes declined from the previous year’s record.
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Statewide, such sales were off about 9 percent last month, and in the Chicago area the decline in sales was even deeper at 13 percent, according to the Illinois Association of Realtors.
Median prices in both categories were up by about 2 percent and 6 percent, respectively.
The Midwest, in fact, was the only region of the country where the median price of a home declined; prices slipped 1.2 percent.
Chicago-area brokerages said the data reflect the marketplace, though some offices continue to enjoy strong sales.
Stephen W. Baird, president and chief executive of Baird & Warner Real Estate in Chicago, said it will take sellers a while longer to change their price expectations.
“Because the pricing model that people use is historical data, when the market slows down, they’re still looking back at data from last year and pricing off that,” he said.
“The market is going to settle out at some level, and it will be a couple of months before we figure out where that is,” Baird said.
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