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Prospects daily: Contracts for home sales strong in final month of federal tax credit

Global Macroeconomics Team's picture

Pending sales of existing U.S. homes increase in April. The National Association of Realtors’ index of pending home sales, defined as purchase agreements where initial contracts have been signed but financing has not been completed, rose 6% (m/m) in April, following an upwardly revised gain of 7.1% in March. April marked the final month of the federal tax credit program, and housing market activity surged in the previous few months as households rushed to take advantage of the program. However, a separate report today showed mortgage applications dropped to lowest levels since April 1997, and foreclosures are estimated to reach a record 1.1 million this year, signaling that the housing market may be in for a setback now that federal support has been lifted.


Source: National Association of Realtors



Among emerging markets:

In East Asia and the Pacific, Thailand left its key interest rate unchanged at 1.25%, the lowest since July 2004, as political violence is undermining growth. Second-quarter GDP is likely to be very weak after weeks of anti-government protests that ignited riots and left 85 people dead.

In Latin America and the Caribbean, Peru’s economic growth picked-up to 6% year-on-year in the first quarter of 2010, the fastest pace since 2008, following a 3.4% rise in the fourth quarter, according to the National Statistics Institute. Government stimulus spending, investment in the mining and energy industries, and 7 interest rate cuts over 2009 are bolstering growth, and the government has begun to wind down its 2-year, $3-billion stimulus program. Government demand was up 8.3% year-on-year. Construction output rose 17% in the first quarter, retail sales grew 8.1%, and manufacturing expanded 7.3%.

In Sub-Saharan Africa, South Africa’s vehicle sales surged 35.3% year-on-year in May, as the Soccer World Cup boosted demand for vehicles from car rental companies. Meanwhile gold output declined 12.4% year-on-year in the first quarter of 2010, after falling 5.8% last year, according to the Chamber of Mines of South Africa.