MacroScope

Another round of bad news on the economy has prompted Goldman Sachs to shave another tenth of a percentage point off their already bleak second quarter U.S. GDP forecast.

The July Philadelphia Fed business activity index improved less than expected and remained “significantly negative,” pointing to a third month of contraction. Following news that June existing home sales were much weaker than forecast, Goldman Sachs economists lowered their Q2 GDP tracking estimate to 1.1 percent from 1.2 percent.

The 5.4 percent month-on-month decline in existing home sales in June, reported by the National Association of Realtors, was much weaker than the consensus expectation, the economists noted. The 4.37 million annualized rate of sales was also lower than expected despite upward revisions to the May sales figures.

“On the other hand, median sales prices of all existing homes  rose 7.9 percent year over year to $189,400 in June,” they noted.  The economists added this was the highest growth rate since February 2006 and the highest level since September 2008, “pointing to a continuing slow pickup in house prices.”

One question is whether a rise in home prices in a slow-growing economy might quickly run into an affordability barrier.