For the first half of this year, GDP growth averaged 2 percent at an annual rate, above the 1.6 percent pace posted over the second half of 2006. We expect GDP growth in the second half of the year to slow from the pace of the second quarter but to outpace growth in the first half as a whole.
Declining residential building activity subtracted significantly from GDP growth in the second quarter and there remain considerable uncertainties in the outlook for the homebuilding sector. While housing starts in the second quarter were about the same as in the first quarter of the year, permits for residential construction declined about 6 percent in the second quarter; together, these indicators suggest that there could be some further decline in activity ahead. Sales of new single-family homes were up slightly compared to the first quarter, while sales of existing homes were down nearly 8 percent. The overhang of both new and existing homes for sale remains substantial, and private analysts expect that declining housing activity will reduce overall GDP growth through the rest of the year, though to a more modest degree than in previous quarters. Developments in the sub-prime mortgage market remain a concern for many families, but do not appear to pose a significant macroeconomic risk.
Real personal consumption expenditures rose 1.3 percent at an annual rate in the second quarter, well below the first quarter’s 3.7 percent pace. Rising gasoline and food prices combined with uncertainties related to the weak housing market likely contributed to the second-quarter slowdown. The fundamentals underpinning consumer spending remain sound: Household balance sheets are healthy, with net worth reaching a new high in the first quarter of 2007 (and still elevated even with recent equity market reversals), and real disposable income is up 3.2 percent over the past four quarters. Rising incomes and the healthy job market should support consumption going forward and serve to offset the downward impetus from softening housing values.
[from – July 2007]
July 30, 2007 – Assistant Secretary for Economic Policy Phillip Swagel Statement for the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association
My Note –
Read my post just before this one because the testimony given by Ben Bernanke twice in 2008 (January and Spring) as well as the US Treasury document mentioned are repeating the same words as this document which came from July 2007.
What is wrong with this picture?
– cricketdiane, 07-16-09