U.S. Economy Expands 2.4% in Q1 2013; Muted Impact on Savings and Mortgage Rates

The impact on savings and borrowing rates is expected to be minor.

The United States Commerce Department reported today that the U.S. economy expanded at a 2.4% rate in the first quarter of 2013. That was within the range predicted by most economists and is considered to be moderate growth. Strong economic growth is usually in the 3% or more category while weak economic growth is generally under 1%.

The Commerce Department report revealed that consumer spending fueled the increase, rising by a 3.4 percent annualized rate in the first quarter. Rising home prices and a buoyant stock market, and declining unemployment have helped improve many Americans’ bottom line and also raised overall consumer confidence.

Government spending fell for the 10th time out of the last quarters as military spending declined. Both the winding down of the wars in Iraq and Afghanistan have contributed to the decrease in government outlays. While positive from a budge deficit standpoint, falling government spending has helped to constrain GDP growth.

So, what does all of this mean from an interest rate perspective? Steady as it goes. Growth is not strong enough to increase inflation, which remains in the 1% range. The Fed has committed to keeping inflation below 2% so the central bank still has wiggle room to keep rates low.

Until GDP growth reaches the 3% range, it’s hard to envision unemployment falling below 6.5% and inflation breaching the Fed’s target of 2%. Until that happens, deposit rates will continue their gradual decline.

Compare local and online CD rates.

Mortgage rates though, more sensitive to longer-term trends have already begun to move higher in anticipation of stronger growth later in the year. Look for mortgage rates to continue to rise if growth continues, as I expect it will.

View Mortgage Rates from local and online lenders.

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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  • Sol

    May 31, 2013

    Consumer spending drops in April. The seesaw of good and bad news regarding the economy continues.


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