Fourth Quarter GDP: Consumer Strength, Building Growing


The advance estimate from the Bureau of Economic Analysis indicates that Gross Domestic Product (GDP) increased at a 2.6% annual rate. This was below expectations (generally around 3%).

While a “miss,” the first estimate of growth for the final quarter of 2014 includes some notable elements of optimism. In particular, consumers – benefiting from improved balance sheets (in part due to higher home values) and reduced gas prices – showed strength. Personal consumption expenditures expanded at a 4.3% annual rate for the quarter, exceeding expectations.

GDP growth was reduced by higher levels of imports and weakness in federal government spending, particularly for defense spending.

4q 14

Residential fixed investment (RFI or home building and remodeling) grew at a 4.1% rate for the fourth quarter. RFI has now expanded for three consecutive quarters, after weakness at the end of 2013 and the start of 2014 due to an increase in interest rates and weather impacts.

Of the 2.6% growth for overall GDP for the fourth quarter, 0.13 percentage points of the total was due to the growth in RFI.

NAHB is forecasting improved economic growth for 2015. For the year, we expect GDP to expand by 3.4%, an acceleration off the 2.4% rate for 2014. Higher levels of job creation, more economic growth and pent-up housing demand should also boost demand for home construction and remodeling during the year.


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