Today, the Bureau of Economic Analysis (BEA) released their second installment of the Q1 2007 GDP Report showing truly anemic growth of 0.6% weighed down by, amongst other things, continued weakening to fixed residential investment.Major praise has to go to Professor Nouriel Roubini for his accurate forecasting having called this deceleration to GDP well in advance as well as virtually nailing the actual figure earlier this month in his post on the “growth recession” while the advance GDP report suggested that growth was closer to 1.3%.
Residential fixed investment, that is, all investment made to construct or improve new and existing residential structures including multi–family units, continued its historic fall-off registering a decline of 15.4% since last quarter while shaving .87% from overall GDP.
Housing continues to be, by far, the most substantial drag on GDP subtracting an amount roughly surpassing to the contributions made by ALL non-durable goods including food, clothing, gasoline, fuel oil.
Keep in mind that the initial GDP reports are highly revised so it seems likely that the coming report (Q1 final) will further capture the historic housing market weakness seen in the first three months of 2007.
The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).
