From Bloomberg:
U.S. Growth Slows to 1.6% Rate as Homebuilding Slumps
Economic growth in the U.S. cooled to a 1.6 percent annual rate in July through September, the slowest since early 2003, as housing slumped and the trade deficit widened.
The government’s first estimate of the quarter’s gross domestic product, the value of all goods and services produced in the U.S., shows growth slowed from a 2.6 percent pace in April through June, the Commerce Department reported today in Washington. A measure of inflation watched by the Fed eased.
Homebuilding declined by the most in 15 years, while the trade deficit widened as an acceleration in personal spending increased demand for foreign-made consumer goods. The fallout for the rest of the economy has been limited, economists said, and recent gains in corporate and consumer spending support the Federal Reserve’s outlook for “moderate” growth.
“Housing-market woes took a lot out of overall growth, but there are increasing signs that the worst may be behind us,” Chris Rupkey, chief financing economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, said before the report. “Consumers continue to spend, and really have the wind at their backs now that gasoline prices have fallen.”
From the AP via Yahoo News:
Economic growth slows to 1.6 pct. pace
Economic growth slowed to a crawl in the third quarter, advancing at a pace of just 1.6 percent, the worst in more than three years.
The latest snapshot of the economy, released by the Commerce Department on Friday, showed that the slumping housing market figured prominently in the economy’s dramatic loss of momentum. Investment in homebuilding was cut by the biggest amount since early 1991.
The reading on gross domestic product was weaker than the 2.1 percent pace many economists were forecasting.
…
Businesses, meanwhile, increased spending on equipment and software at a 6.4 percent pace in the third quarter, an improvement from the 1.4 percent rate of decline in the second period.The economy’s softness in the third quarter stemmed in large part from the cooldown in the once-hot housing market.
Spending on home building dropped at a rate of 17.4 percent in the third quarter. That was the biggest drop since the first quarter of 1991 when such spending was sliced at a 21.7 percent pace.
Not surprising. I was guessing in the high 1% range. It could’ve surprised on the upside or been lower and I wouldn’t of been at all shocked. Be interesting to see if this is just a blip and 4th quarter bounces back or gets worse. Roubini the ‘nutcase’ has been calling for a recession next year, most likely hitting in the 3rd quarter. He may not be such a crack head after all.
How do you think the market is going to react?
Based on recent peformance, I would go with the counterintuitive rise.
“Housing-market woes took a lot out of overall growth, but there are increasing signs that the worst may be behind us,’’ Chris Rupkey, chief financing economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York
What is he smoking? Most home owners will not be able to cash thier ‘ATM’ this christmas.
This is GDP, not CPI
stock market will trade lower, bonds will gain. that’s what happens with weak news on gdp. note there are some who believe the forecast is the most optimistic scenario so that once revised we could be looked at something a tad above 1%. youch.
theo – What is not GDP?
It’s GDP growth and not Consumer Price Index (CPI) that slowed to 1.6%
As far as inflation figures go, it was relatively benign (as expected due to the energy pricing decrease)- the PCE deflator fell to 2.4% from 2.7%.
MMAfia
Just a typo, nothing more.
jb
At noon, the markets were essentially flat. Simply put, the market has decoupled from the news cycle. Bad news has not driven the market down in a month.
This, especially following yesterday’s new homes report should have pushed stocks lower, but it’s not happening.
I have no idea why this would happen.
Too bad mr. rupkey cannot share those increasing signs with us.