According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) increased at an annual rate of 2.1% in the second quarter of 2019, down from a 3.1% increase in the first quarter of 2019 and above NAHB’s forecast of 1.6%. It is the 21st consecutive quarter of growth.
Today’s release also reflected the results of the annual update of the National Income and Product Accounts (NIPAs) for the past five years. According to the updated data, real GDP rose 2.9% in 2018, compared to an increase of 2.4% in 2017 and an increase of just 1.6% in 2016 (a fairly significant slowdown reversed by tax reform). The updated data also showed the sharp deceleration in the fourth quarter of 2018.
The increase in real GDP in the second quarter of 2019 largely reflected increases in personal consumption expenditures (PCE), which, alone, accounts for about 70 percent of the overall economy, and government spending. Meanwhile, growth in imports, which are a subtraction in the calculation of GDP, and decreases in gross private domestic investment and exports had negative contributions to economic growth in the second quarter of 2019.
The deceleration in economic growth in the second quarter of 2019 reflected decreases in gross private domestic investment and exports. Exports decreased 5.2% at a seasonally adjusted annual rate in the second quarter of 2019, while gross private domestic investment dropped 5.5%. Additionally, the contribution of residential fixed investment (RFI) to GDP growth fell by 0.06 percent in the second quarter of 2019, compared to the 0.04 percent decline in the first quarter. Residential fixed investment (home building and remodeling) has been a drag on economic growth for six consecutive quarters, due to the housing affordability crisis.