Mortgage Pros, Inc.

Jan. 29 (Bloomberg) — The economy in the U.S. expanded in the fourth quarter at the fastest pace in six years as factories cranked up assembly lines to prevent inventories from plunging.
The 5.7 percent increase in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance since the third quarter of 2003, figures from the Commerce Department showed today in Washington. A smaller decrease in stockpiles contributed 3.4 percentage points to GDP, the most in two decades.
Manufacturers such as Intel Corp. may keep leading the recovery as increasing sales prompt companies to restock. A slowdown in consumer spending last quarter is a reminder that 10 percent unemployment is causing Americans to hold back, one reason why the Federal Reserve is keeping interest rates low and the Obama administration is proposing new plans to create jobs.
“Business are now feeling confident enough to deploy a larger portion of the recent strong corporate earnings rebound into new investment spending,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “This is a key development to support a strong, non-inflationary recovery.”
The economy was forecast to grow at a 4.7 percent annual pace, according to the median estimate of 84 economists in a Bloomberg News survey. Estimates ranged from gains of 3 percent to 7.5 percent.
For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946.

Consumer Slowdown

Consumer spending, which comprises about 70 percent of the economy, rose at a 2 percent pace, more than anticipated following a 2.8 percent increase in the previous three months.
Economists projected a 1.8 percent gain, according to the survey median.
Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August.
Household purchases dropped 0.6 percent last year, the biggest decrease since 1974.
Increases in production last quarter stemmed the slide in inventories. Stockpiles dropped at a $33.5 billion annual pace following a $139.2 billion decline the previous three months.
Inventories declined at a record $160.2 billion pace in the second quarter.

Investment Pickup

Today’s report showed purchases of equipment and software increased at a 13 percent pace in the fourth quarter, the most since 2006. The gain helped offset a 15 percent drop in commercial construction, leaving total business investment up
2.9 percent over the past three months.
Intel, the world’s largest chipmaker, posted its biggest quarterly revenue in more than a year last quarter, a sign the computer industry has emerged from last year’s global recession.
“My expectation for 2010 is that we’re going to see robust unit growth,” Chief Financial Officer Stacy Smith said in an interview this month. “The consumer segments of the market will stay pretty strong, and I do believe we’re going to see a resurgence in PC client sales.”
A report yesterday showed companies ordered more capital goods such as machinery and computers in December, indicating business investment will keep expanding.

Job Losses

Jobs is one area where a rebound is still not evident.
Payrolls fell by 85,000 last month after a 4,000 gain in November that was the first increase in almost two years. The U.S. has lost 7.2 million since the start of the recession in December 2007, the most of any slowdown in the post-World War II era.
The jobless rate held at 10 percent in December, the Labor Department said on Jan. 8. A jump in the number of discouraged workers leaving the labor market kept the rate from rising.
President Barack Obama this week said job creation will be the “number one focus in 2010.” Speaking during his first State of the Union address, Obama called on Congress to deliver a new jobs bill to his desk.
Fed policy makers, after their meeting this week, said the recovery is gaining strength and business investment “appears to be picking up.” They also repeated a pledge to keep the benchmark interest rate low for an “extended period.” The central bankers held the overnight lending rate between banks in the range near zero, where it has been for more than a year.
In other areas of the economy, today’s report showed a smaller trade gap contributed 0.5 percentage point to fourth- quarter growth, while government spending was little changed, dropping at a 0.2 percent pace.

Home Construction

Residential construction climbed at a 5.7 percent rate last quarter after expanding at a 19 percent pace in the previous three months.
Inflation held below the Fed’s long-term forecast. The central bank’s preferred price gauge, which is tied to consumer spending and strips out food and energy costs, rose at a 1.4 percent annual pace following a 1.2 percent increase in the prior quarter.
The GDP price gauge climbed at a 0.6 percent pace, less than the 1.3 percent median forecast of economists surveyed.
Today’s GDP report is the first for the quarter and will be revised in February and March as more information becomes available.

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Jan. 20 (Bloomberg) — The number of mortgage applications in the U.S. rose 9.1 percent last week, led by a rebound in refinancing activity as borrowing costs dropped.
The Mortgage Bankers Association’s index of loan applications climbed to 575.9 in the week ended Jan. 15, a one- month high, from 528.1 a week earlier. The group’s refinancing gauge jumped 11 percent, while the purchase gauge advanced 4.4 percent.
Refinancing climbed for the second consecutive week as the rate on a 30-year fixed mortgage fell by the most in five months. Gains in sales may be harder to sustain as a growing economy prevents rates from falling much more and with unemployment projected to average 10 percent this year, offsetting the benefits of a government tax credit.
“Refinancings and new-purchase applications have been bouncing along the lows for some time now,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “At this point, mortgage activity has little downside as it is very close to the recession lows.”
The mortgage bankers group’s refinancing gauge rose to 2663.8 from 2407.2 the prior week. The purchase index rose to
223 from 213.7 the prior week.
The group’s refinancing index is often volatile near year- end, making it difficult to determine the underlying trend. The measure plunged 38 percent in the last three weeks of 2009, and is now up 35 percent in past two weeks.
To contact the reporter on this story:
Bob Willis in Washington +1-202-624-1837 or bwillis@bloomberg.net
To contact the editor responsible for this story:
Christopher Wellisz at +1-202-624-1862 or cwellisz@bloomberg.net

Producer Prices in U.S. Rose 0.2% in December; Ex-Oil Unchanged
2010-01-20 13:30:00.487 GMT
By Courtney Schlisserman

Jan. 20 (Bloomberg) — Wholesale prices in the U.S. rose at a slower pace in December, showing the economy is recovering without the immediate threat of inflation.
The 0.2 percent increase in prices paid to factories, farmers and other producers followed a 1.8 percent jump in November, according to Labor Department data released today in Washington. The gain was more than anticipated and reflected higher food costs. Excluding food and fuel, so-called core prices were unchanged.
An unemployment rate projected to average 10 percent this year and excess capacity are giving companies room to hold the line on prices. Few signs of inflation will allow the Federal Reserve to keep interest rates near zero in coming months to help fuel the economic recovery.
“The substantial slack in the economy will keep inflation subdued this year,” Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “As the recovery gains momentum in 2011 then inflation will be more of a concern and that’s when we expect the Fed to aggressively raise interest rates.”
Economists forecast no change in December producer prices, according to the median of 73 projections in a Bloomberg News survey. Estimates ranged from a decrease of 0.5 percent to an increase of 0.5 percent.
Prices excluding food and energy were forecast to rise 0.1 percent after a 0.5 percent increase a month earlier, according to the survey median. Core prices have increased in one of the last four months.
Wholesalers received 4.4 percent more for their goods last year, compared with a 0.9 percent decrease in 2008. Core producer prices rose 0.9 percent in 2009, the smallest gain since 2002.
Year-over-year costs may keep rising the next few months as the plunge in fuel prices at the depths of the recession in late
2008 and early 2009 drops out of the calculations.
To contact the reporter on this story:
Courtney Schlisserman at +1-202-624-1943 or cschlisserma@bloomberg.net
To contact the editor responsible for this story:
Christopher Wellisz at +1-202-624-1862 or cwellisz@bloomberg.net

Housing Starts in U.S. Fell More Than Forecast, Permits Climb
2010-01-20 13:30:00.647 GMT
By Bob Willis

Jan. 20 (Bloomberg) — Housing starts in the U.S. fell more than anticipated in December, while building permits unexpectedly jumped, signaling inclement weather may have kept builders away from worksites.
Work began on 557,000 houses at an annual rate, down 4 percent from November, figures from the Commerce Department showed today in Washington. Permits, a sign of future construction, climbed to the highest level in a year.
The government’s extension and expansion of a tax credit for first-time buyers may help underpin demand in the first half of 2010, giving builders reason to ramp up new projects. The gain in permits, which are less influenced by weather, indicates an unseasonably cold and wet December probably prevented some work from getting started last month, according to economists like Maury Harris.
“It’s the weather,” Harris, chief economist at UBS Securities LLC in New York, said before the report. “The deadline for the homebuyer tax credit is going to accelerate sales and building activity” in coming months.
Starts were projected to fall to a 572,000 pace last month according to the median estimate of 72 economists surveyed by Bloomberg News. Projections ranged from 495,000 to 630,000. The government revised November’s reading up to a 580,000 from the 574,000 previously estimated.
For all of 2009, builders broke ground on 553,800 houses, the fewest since records began in 1959. The annual rate was down
39 percent down from 2008’s 905,500, which was the second-lowest ever.

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Jan. 19 (Bloomberg) — International demand for long-term U.S. stocks, bonds and financial assets rose in November as private investors purchased a record number of government securities, a Treasury Department report showed.
Net buying of long-term equities, notes and bonds totaled $126.8 billion for the month, compared with net buying of $19.3 billion in October, the Treasury said in Washington. Including short-term securities such as stock swaps, foreigners purchased a net $26.6 billion in November, compared with net selling of $25.4 billion the previous month.
The economic recovery from the deepest recession since the 1930s and growing corporate profits are making U.S. investments more attractive. Increased demand for U.S. securities by countries such as China may help keep interest rates low.
“There’s still a lot of investors seeking the security of government paper,” Gary Thayer, macro strategist at Wells Fargo Advisors in St. Louis, said before the report. “The investment environment, a lot of people think, is still pretty uncertain.
We are seeing decent demand.”
Economists projected investors would purchases a net $27.5 billion of long-term securities in November, according to the median of six estimates in a Bloomberg News survey. The Treasury previously reported total purchases of long-term stocks, notes and bonds were a net $20.7 billion.
The Treasury’s reporting on long-term securities captures international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as Fannie Mae and Freddie Mac, which buy home mortgages.
To contact the reporters on this story:
Vincent Del Giudice in Washington at +1-202-624-1882 Or vdelgiudice@bloomberg.net
To contact the editor responsible for this story:
Chris Wellisz at +1-202-624-1862 or cwellisz@bloomberg.net

Economic Calendar

Date Time Event Survey
01/19/2010 09:00 Net Long-term TIC Flows NOV $25.0B
01/19/2010 09:00 Total Net TIC Flows NOV – -
01/19/2010 13:00 NAHB Housing Market Index JAN 17
01/19/2010 17:00 ABC Consumer Confidence 17-Jan -44
01/20/2010 07:00 MBA Mortgage Applications 15-Jan – -
01/20/2010 08:30 Producer Price Index (MoM) DEC 0.00%
01/20/2010 08:30 PPI Ex Food & Energy (MoM) DEC 0.10%
01/20/2010 08:30 Producer Price Index (YoY) DEC 4.50%
01/20/2010 08:30 PPI Ex Food & Energy (YoY) DEC 1.00%
01/20/2010 08:30 Housing Starts DEC 574K
01/20/2010 08:30 Building Permits DEC 580K
01/20/2010 08:30 Housing Starts DEC – -
01/21/2010 08:30 Initial Jobless Claims 16-Jan 440K
01/21/2010 08:30 Continuing Claims 9-Jan 4598K
01/21/2010 09:00 RPX Composite 28dy YoY NOV – -
01/21/2010 09:00 RPX Composite 28dy Index 19-Nov – -
01/21/2010 10:00 Philadelphia Fed. JAN 18.5
01/21/2010 10:00 Leading Indicators DEC 0.70%

Treasuries Snap Two Days of Gains on Bets Rally Unsustainable
2010-01-19 14:15:56.653 GMT
By Susanne Walker and Cordell Eddings

Jan. 19 (Bloomberg) — Treasuries fell for the first time in three days as investors bet the rally that pushed 10-year note yields to the lowest levels in almost a month may not be sustained.
Ten-year notes declined after last week posting the biggest gain since November amid indications the economic recovery has yet to take hold. Foreign purchases of Treasury notes and bonds were $118.3 billion in November compared with purchases of $38.9 billion in October, a Treasury Department report showed.
“We had a decent rally last week,” said Michael Pond, an interest-rate strategist in New York at Barclays Plc, one of 18 primary dealers that trade with the Federal Reserve. “Yields have gotten closer the yield levels that just aren’t attractive given the lack of news.”
The yield on the 10-year note rose three basis points, or
0.03 percentage point, to 3.70 percent at 9:13 a.m. in New York, according to BGCantor Market data. It earlier touched 3.64 percent, the lowest level since Dec. 21. The 3.375 percent security due November 2019 fell 6/32, or $1.88 per $1,000 face amount, to 97 11/32.
The yield fell 15 basis points last week as retail sales unexpectedly declined and consumer prices rose less than forecast.

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