Monday, April 03, 2006

LAST WEEK'S ECONOMIC HIGHLIGHTS

The Federal Reserve raised the federal funds rate (the interest rate on overnight loans between banks) another quarter-point to 4.75%, the highest level in five years. In its March 28 announcement, the Fed also stated, "Further policy firming may be needed."

Consumer spending showed a minuscule 0.1% gain in February, after a huge 0.8% surge in January, the Commerce Department said March 31. It was the weakest gain in six months. Meanwhile, personal incomes rose by 0.3% in February, less than half the 0.7% jump in January. The Commerce Department further reported that the overall economy (gross domestic product) grew by just 1.7% in the final three months of 2005, the weakest rate in a decade.

Americans' optimism in the economy, however, rebounded in March, sending the Conference Board's widely followed index on consumer confidence up 4.5 points to 107.2, the highest level since May 2002. Analysts had expected a reading of 102. The University of Michigan's consumer sentiment index, issued March 31, also rose from 86.7 in February to 88.9 in March.
Mortgages showed positive movement as well, as the Mortgage Bankers Association (MBA) market index, published March 29, rose 1.2% over the previous week. The MBA's purchase index increased 2.7% while its refinancing index fell 1.0%.

The number of Americans filing new jobless claims fell by 10,000 to 302,000 in the week ended March 25, suggesting continued health in the labor market.
(Courtesy of Louise Rose, ELB Mortgage Brokers)

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