GDP Reports Strength in Housing Market

The National Association of Home Builders reported that the housing share of the GDP rose for the first time in six quarters, increasing to 14.6% in Q3 2019. The overall GDP growth slowed to 1.9%. 

The NAHB analysis said the gains are due to rising single-family permits since April and an increase in single-family starts since May.

Data shows that the home building and remodeling section increased to 3.11% of the total GDP an added 0.18 basis points to the overall GDP growth rate. 

Housing-related activities contribute to the GDP in two ways. The first is through residential fixed investment (RFI), which is the measure of home building, multifamily development, and remodeling contributions to GDP. the RFI includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes and brokers’ fees. 

The RFI during Q3 2019 was 3.1% of the economy and reached a $594 billion seasonally adjusted pace. 

The second impact housing has on GDP is the measure of housing services, which includes gross rents paid by renters, and owners’ imputed rent—an estimate of what it would cost to rent owner-occupied units—and utility payments. 

Housing serves was 11.5% of the economy, or $2.18 trillion. 

A report by CNBC said the economy beat expectations during Q3 2019, coming in above the projected growth of 1.6%, which was projected by the Dow Jones. 

CNBC added that economy beat expectations based on continued consumer spending and government expenditures, according to the Commerce Department. Personal consumption expenditures rose 2.9% annually while government spending rose by 2%. 

Growth in private domestic investment declined by 1.5%, which is better than the 6.3% drop during Q2 2019. 

“For manufacturers, the biggest challenges remain finding skilled labor and trade uncertainties, which make it difficult to hire and expand business operations,” said Chad Moutray, Chief Economist at the National Association of Manufacturers.

The 2.9% growth in consumption in Q3 2019 is a decline from the prior quarter's 4.6% pace.