Economic Forecast Paper

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Economic Indicators Paper
The Housing Industry
By

Tracey Matthew
Andre' Patterson
Julie Taylor

ECO/360
University of Phoenix
July 26, 2007

Mohyeddin Kassar, Instructor

Economic Indicators

Introduction
As previously outlined in our team's first project regarding the housing industry, there were six economic indicators which impact the housing industry. These indicators are GDP, the inflation rate, the unemployment rate, discount mortgage interest rates, housing starts and retail sales. Included will be a brief definition of each and its current status. Real GDP

Real GDP, or gross domestic product, is an inflation-adjusted measure that reflects the value of all goods and services produced in a given year. Unlike nominal GDP, real GDP can account for changes in the price level and often provides a more accurate figure (Investopedia, A Forbes Media company, 2007).

According to a report released in December, 2006 Wells Fargo economists are optimistic about the 2007 economic growth. "The Gross Domestic Product (GDP) growth is expected to rebound as soon as next quarter" (2007 News Releases, 1999-2007). Dr. Jim Paulsen, chief investment strategist of Wells Capital Management predicts a 3.5 percent growth rate for 2007 based on expectations that the housing and automobile markets will flatten out. The Inflation Rate

Inflation can be defined as the overall general upward price movement of goods and services in an economy (BLS, 2007). It is a continual rise in price levels and, subsequently, purchasing power is falling. The Consumer Price Index (CPI) measures inflation as experienced by consumers in their day-to-day living expenses and is separated into two groups or populations of consumers: The CPI for All Urban Consumers (CPI-U) and the CPI for Urban Wage Earners and Clerical Workers (CPI-W).

The current status of inflation as measured by calculating the current CPI-U and is published monthly by the Bureau of Labor Statistics. According to the Consumer Price Index for June 2007, the CPI-U increased 0.2 percent in June, before seasonal adjustment. The June level of 208.352 (1982-84=100) was 2.7 percent higher than in June 2006 (BLS, 2007). Economists reporting for Wells Fargo stated, "What the Fed needs to do today is encourage U.S. consumers and the government to save, not consume" (2007 News Releases, 1999-2007).

Current Inflation Rate
YearJanFebMarAprMayJunJulAugSepOctNovDecAve
20072.08%2.42%2.78%2.57%2.69%2.69%
20063.99%3.60%3.36%3.55%4.17%4.32%4.15%3.82%2.06%1.31%1.97%2.54%3.24% 20052.97%3.01%3.15%3.51%2.80%2.53%3.17%3.64%4.69%4.35%3.46%3.42%3.39% 20041.93%1.69%1.74%2.29%3.05%3.27%2.99%2.65%2.54%3.19%3.52%3.26%2.68% 20032.60%2.98%3.02%2.22%2.06%2.11%2.11%2.16%2.32%2.04%1.77%1.88%2.27% 20021.14%1.14%1.48%1.64%1.18%1.07%1.46%1.80%1.51%2.03%2.20%2.38%1.59% 20013.73%3.53%2.92%3.27%3.62%3.25%2.72%2.72%2.65%2.13%1.90%1.55%2.83% 20002.74%3.22%3.76%3.07%3.19%3.73%3.66%3.41%3.45%3.45%3.45%3.39%3.38% Get more Historical Data from InflationData.com

The Unemployment Rate
The unemployment rate is the percentage of people in the economy who are willing and able to work but who are not working (Colander, 2004).
The Bureau of Labor Statistic reports the employment situation in various categories: nonfarm, unemployment (household survey data), total employment and labor force (household survey data) and persons not in the labor force (household survey data). As of June 2007, nonfarm payroll employment increased by 132,000 in June and the unemployment rate was unchanged at 4.5 percent.

The number of unemployed persons was essentially changed in June—6.9 million—and the unemployment rate held at 4.5 percent. The jobless rate has ranged from 4.4 to 4.6 percent since September 2006.

Both total employment labor force (146.1 million) and the civilian labor force...
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