CU Economic Reports So Far in 2023 Aren’t So Bad

The books are almost closed on January, and the economy still isn’t terrible.

Signs of improvement for January included rising new car sales, falling mortgage rates and three weeks of rising mortgage applications.

And NAFCU Chief Economist Curt Long was pleased with Thursday’s estimate that the gross national product rose 2.9% in the fourth quarter adjusted for inflation, following a 3.2% increase in the third quarter and small dips in the first and second quarters.

“The big picture view of economic growth in the fourth quarter is a positive one,” Long said.

“Much of that growth was concentrated in inventory build, which is unlikely to grow at a similar pace in 2023,” he said. “Nevertheless, with resilient consumer spending, low unemployment claims and receding inflation, some of the clouds that were forming over the economy several months ago are beginning to clear.”

Economists at the Mortgage Bankers Association have forecast a recession to begin early this year, but they have now reported three weeks in a row of rising applications with gains in both purchase and refinance activity.

“Borrower demand, thanks to lower mortgage rates, continues to rise in early 2023, MBA President/CEO Bob Broeksmit said. “Purchase demand is still below year-ago levels, but lower rates and improving affordability are favorable developments for the housing market heading into the spring.”

Joel Kan, the MBA’s deputy chief economist, said mortgage rates declined for the third straight week with the 30-year fixed rate reaching its lowest level since September 2022 at 6.2% for the week ending Jan. 20.

On Friday, the National Association of Realtors reported that pending home sales increased in December for the first time since May 2022 — following six consecutive months of declines in the measure, which it considers a good early indicator of upcoming sales.

“This recent low point in home sales activity is likely over,” NAR Chief Economist Lawrence Yun said. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”

Cox Automotive on Wednesday forecast a “surprising gain” for new car sales for January. It expects new cars sold this month at a seasonally adjusted annual rate of nearly 15.6 million, up from 13.3 million in December and 12.7 million in January 2022.

Cox Automotive Senior Economist Charlie Chesbrough said high interest rates continue to hold back the new-vehicle market, while some concerns with inventory supply appear to be falling away.

Part of January’s strength came from gains in fleet sales, which don’t translate into credit loans.

TrueCar, based in Santa Monica, Calif., forecast total SAAR for new cars and light trucks to be 16 million in January, up 7% from January 2022. Used vehicle sales for this month are expected to reach almost 2.5 million vehicles, down 21% from a year ago and even with December 2022.

TrueCar projected that the average transaction price for new vehicles in January will be up 3% from a year ago and down 2% from December 2022.

“Consumers continue to face rising new-vehicle prices across the industry,” TrueCar analyst Zack Krelle said. “However, the pace has slowed as inventory for many high-demand vehicles grows.”

However, interest rates have continued to inflate payments. TrueCar found the average interest rate on new vehicles is 6.9%, up from 6.7% in December. The average interest rate on used vehicles is 10%.