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GDP Growth Slows in Q3, But Forecast to Have “Neutral Effect” on Housing

riseNational gross-domestic product (GDP) growth increased at an annual rate of 1.5 percent in the third quarter "advance" estimate released by the Bureau of Economic Analysis (BEA), down drastically from the last quarter when the GDP rose to a healthy 3.9 percent.

According to the BEA, this is the first of three estimates for the third quarter.

"The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), state and local government spending, nonresidential fixed investment, exports, and residential fixed investment that were partly offset by negative contributions from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased," the BEA said in its report.

"We anticipate this having a neutral effect on housing – in that, the recent slowdown will allow interest rates to stay low, but we will see a slight headwind from some level of negative consumer sentiment." -Dave Zitting

National Association of Federal Credit Unions (NAFCU) Chief Economist Curt Long predicted that the GDP would reverse directions Wednesday.

“We expect to see a slowdown from what was a pretty solid number of 3.9 percent in the second quarter,” Long noted. “Some of that will be due to the strong dollar hurting net exports. We also saw some pretty strong growth in inventory accumulation during the first half, so we’d expect some of that to be given back in the second half of the year.”

GDP_Q32015Despite the slow GDP, Dave Zitting, CEO and president of Primary Residential Mortgage Inc., told MReport that this will have a "neutral effect on housing."

“The strengthening dollar, coupled with an overall global slowdown is starting to make its way onto Main Street USA. Exports are suffering a double blow, while at the same time there is a newly adopted conservative attitude in corporate spending," Zitting said. "The Fed is providing very little guidance on policy, but there is no doubt that there are concerns with the depth and longevity of the recent global weaknesses. We anticipate this having a neutral effect on housing – in that, the recent slowdown will allow interest rates to stay low, but we will see a slight headwind from some level of negative consumer sentiment. Our guess is that we will still see a flattening housing market in 2016 – with the possibility of a small net gain.”

Mike Hardwick, president and founder of Churchill Mortgage also commented to MReport on the drastic decline in the GDP and its anticipated effect on the housing sector.

"Solid wage growth is just not happening. Until it does, folks are just not going to make any real and dramatic spending increases," Hardwick explained. "Many people are still worried about things like job security, income increasing at a reasonable rate or their savings earning any “real” income–or the overall return of a healthy economy. At the end of the day – as James Carville famously said – it’s “the economy, stupid.”"

White House blog writer Jason Furman said that the "economic growth in the third quarter reflected the combination of solid domestic demand and volatile transitory factors."

He added, "Personal consumption continued to grow at a solid pace, while inventory investment slowed sharply and net exports were largely neutral for overall growth. Over the past year, slowing global demand has been a headwind for the U.S. economy, and unnecessary austerity and fiscal brinkmanship have posed unnecessary risks for consumer spending and business investment."

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About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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