Today, the Bureau of Economic Analysis (BEA) released their first installment of the Q2 2007 GDP Report showing higher than expected growth of 3.4%, buoyed by strength in nonresidential structures and federal, state and local government spending while continuing to be weighed down by weakness to fixed residential investment.
It’s important to keep in mind that today’s results are very preliminary and will not be finalized for another two installments.
Additionally, today’s report reflected a revision to the national income and product accounts (NIPAs) which resulted in revisions to virtually every estimate since 2004.
As a result of the NIPA revision, previously reported estimates of residential fixed investment were generally revised lower resulting in an even greater impact on the GDP results seen in 2006 and 2007.
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 9.3% since last quarter while shaving .49% from overall GDP.
Housing continues to be, by far, the most substantial single drag on GDP subtracting an amount roughly equivalent to the contributions made by all exports during the quarter.
The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).
