|
Real GDP
Growth
| |
3Q09 - Adv. |
3Q09 - Pre. |
3Q09 - Fin. |
 |
| MOST RECENT STATISTIC: |
3.5% |
|
|
| Grade: |
B- |
| PERIOD COVERED: |
3Q2009 |
| Date Released: |
10/29/09 |
|
|
|
| Next Release: |
11/24/09 |
|
|
|
|
| Annualized
Change |
|
|
3Q2009 |
2Q2009 |
1Q2009 |
3Q2008 |
3Q2007 |
|
|
| Annualized
% Change |
3.5% |
(0.7%) |
(6.4%) |
(2.7%) |
3.6% |
|
| Implicit
Price Deflator |
0.8% |
0.0% |
1.9% |
4.1% |
1.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized
Change in GDP Components |
| |
3Q2009 |
|
|
|
|
|
| Consumer
Spending |
3.4% |
|
|
|
|
| Business
Spending |
11.5% |
|
|
|
|
| Government
Spending |
2.3% |
|
|
|
|
| Exports |
14.7% |
|
|
|
|
| Imports |
16.4% |
|
|
|
|
|
| Source:
Bureau of Economic Analysis |
|
Analysis for the Housing Market
By:Ken Lee
Advance estimates for third quarter gross domestic product showed the economy rebounding to expand at its quickest pace in two years. Gross domestic product increased 3.5% in the advance third quarter report which is better than the 0.7% decline reported for the second quarter. GDP declined for four consecutive quarters before rebounding in the third quarter which was driven by government stimulus funds and a rebound in housing. A pick-up in consumer and business spending along with a jump in export activity helped offset an increase in imports and slower government spending in the third quarter.
Gross private domestic investments jumped 11.5% compared to 23.7% contraction in the second quarter and was surprisingly boosted by an increase in residential investments. Residential investments rebounded 23.4% in the quarter which was the first time since the fourth quarter 2005 that it hasn't been negative. Government spending increased 2.3% compared to 6.7% growth in the final second quarter report. Non-residential business investments showed contraction of 2.5% compared to a contraction of 9.6% in the final second quarter report. Consumer spending, which accounts for nearly two-thirds of GDP, increased 3.4% compared to 0.9% contraction in the final second quarter report. Exports jumped 14.7% in the third quarter compared to a 4.1% decline in the second quarter while imports, which take away from growth, increased 16.4% in the third quarter compared to a 14.7% in the previous quarter.
The advance figure for the third quarter GDP price deflator increased 0.8% in the third quarter which was higher than it was in the previous quarter when it remained flat. The price deflator is a metrics used to gauge inflationary price pressures.
*A comprehensive revision took place in the advance second quarter release for the time period from 1929 through first quarter 2009.
Definitions and Importance for the Housing Market
By:Jonas Adams
The best measure of the economy's health is the real growth rate (growth in excess of inflation) of the Gross Domestic Product (GDP). A recession is considered to be a period when GDP growth is negative for two consecutive quarters. The country's Real Gross Domestic Product is the sum of the output of goods and services that are located in the United States. GDP is a measure of total spending in three categories (consumer spending, business spending, and government purchases), and is adjusted for net exports. Net exports is negative because the United States imports far more than it exports. Consumption (consumer spending) is the most import component and comprises approximately 68 percent of GDP.
The annual real GDP growth rate is determined by measuring the quarterly growth rate, and assuming that rate continues for a full year. Preliminary estimates are released one month and two months after quarter end, and the final revision is released almost three months after quarter end.
The rate of GDP growth is very important to the housing market, not only because it measures the strength of the economy, but also because the variance from what is considered to be the long-term achievable growth rate influences Federal Reserve policy, which directly affects mortgage rates. When the economy is fully employed (generally considered to be when the unemployment rate is around 5.0%, real GDP growth of 2.5% has traditionally been considered to be the long-term achievable growth rate. This range is determined by adding the historical population growth of 1.0% and the historical productivity improvement of 1.5%. Recent technological advancements, however, have led to significant improved productivity, which in turn has led Federal Reserve Chairman Greenspan and others to conclude that 3.0% to 3.5% may be the new long-term sustainable growth rate.
The Federal Reserve controls the discount rate (the rate at which banks borrow from the Fed) and the Fed Funds rate (the rate at which banks borrow from each other). These rates have a "trickle down" effect on economic growth (GDP) because higher bank costs lead to higher borrowing costs for consumers and companies, which in turn slows spending. Additionally, a trickle down effect occurs on mortgage rates because banks must raise mortgage rates to cover their costs. Higher mortgage rates eventually dampen housing demand, which eventually reduces economic growth.
When the economy is growing faster than the Fed deems to be sustainable, the Federal Reserve is inclined to raise interest rates to slow the rate of growth and prevent inflation from accelerating. A quickly growing economy can lead to rapidly rising wages and salaries, which increases the cost of goods and, therefore, leads to inflation. An inflationary environment is not good for the economy due to reasons that are far too comprehensive to discuss here.
For more information on GDP go to:
http://www.bea.doc.gov/bea/dn1.htm
© 2005 Hanley Wood LLC. |
