If you want to add a headache to your day's aggravation, you are invited to read the latest Economic Outlook report issued late Wednesday by Freddie Mac's Office of the Chief Economist.

It isn't their fault, nobody seems to understand what is going on nationally or internationally, but one can't help but think of the scholar who explained to his class that on one hand..., but on the other hand.... and on the other hand ..... Freddie doesn't have enough hands.

Here is a summary.

The good news: GDP (Gross Domestic Product) for the first quarter 2005 came in at 3.5 percent, consistent with stable or slowly declining unemployment. Labor productivity increased to 2.9 percent annualized for the first quarter and consumer confidence grew a bit. Taken at face value, Freddie says, these point to an economy performing well and are consistent with stable and low inflation.

On the other hand, there has been no improvement in U.S. net exports and the trade deficit remains high. Labor costs rose again during the first quarter following a "jarring" increase at the end of 2004, and the May job creation figure, as has been widely reported elsewhere, indicated only 78,000 new jobs and a continued decline in the manufacturing sector.

On the other hand...

... Freddie seems more confident with its current predictions on the home ownership front. While mortgage rates have continued a slow downward trend (today's Freddie Mac survey, which we will report in full next week reported a 13 month low in interest rates for some products) Freddie is holding firm to its previously stated expectations of gradual rate increases over the next few years. The report lowered the expected average for both Q2 and all of 2005 by 10 basis points from the May projections to 5.8 percent and 6.0 respectively and its quarter by quarter projections for the last three quarters of 2006 are up slightly but the average annual figure is 6.4 percent, the same as in the May report.

While the ARM share of total mortgage originations has been holding its own in recent months, Freddie still predicts that, as the yield curve flattens, these products will become less popular in spite of continuing lender discounts off of the initial rate term and will represent an average of 31 percent for the year.

The report notes that, record sales of new and existing homes in April notwithstanding, the inventory of houses for sale has been slowly growing and now represent a four month supply at current absorption rates. This will, of course, lessen the upward pressure on home prices. The current forecast calls for a 7.7 percent increase in prices this year (compared to 11.0 in 2004) but the report's accompanying tables show an unexplained drop in appreciation during the third quarter of 2005 to 6.6 percent as compared to 8.2 projected last month. Perhaps a typographical error?