Housing data may be looking up, but economists are still weary with the nation’s gross domestic product estimate coming in lower than initially expected for quarter one.
The lower GDP estimate was partially offset by news of a drop in jobless claims Thursday.
The number of unemployment benefit claims filed in the week ending June 22 reached 346,000, down by 9,000 filings from the previous week.
The four-week moving average came in at 345,750 – a weekly decline of 2,750 filings.
Economists in the housing sector suggest consumers are still struggling with day-to-day spending, a factor stalling a more robust economic recovery.
Peter Muoio, senior principal and economist with Auction.com Research, said the lowering of the 1Q GDP estimate shows just how volatile economic data can be from one report to the next.
“The final estimate of first quarter GDP growth was released … and it underscores a key message we have been repeating for years: initial estimates of important economic data are based on such incomplete data that they are too vulnerable to revision to be taken too seriously,” Muoio wrote.
With consumer spending remaining the largest part of the U.S. economy, Muoio sees the market struggling as household budgets tighten.
“We had expressed surprise at the earlier estimates in the strength of consumer expenditures in the immediate aftermath of the tax hikes that started the year,” he wrote.
“Anecdotal reports from retailers had hinted at a negative impact particularly from the increase in the payroll tax, which hit a large swathe of US households, many of whom statistics show are living from paycheck to paycheck with little or no financial cushion. The Fed-induced equity boom (until recently) did little to improve the financial position of these households.”
Adding more fuel to the fire is weakness in trade flows with both exports and imports falling in 1Q, the Auction.com economist added.