April 27, 2007 (GDP Byte)
Declines in Housing and Exports Depress Growth
GDP Byte By Dean Baker
For Immediate Release: April 27, 2007
Contact: Lynn Erskine, 202-293-5380 x115
Productivity Growth has averaged just 1.6 percent since 2004.
Continuing declines in the housing sector,
coupled with a fall in net exports, held GDP growth in the first
quarter to 1.3 percent. This is the slowest growth rate since the first
quarter of 2003, when the economy grew at a 1.2 percent annual rate.
Consumption remains the main prop to the
economy, growing at a 3.8 percent rate and adding 2.66 percentage
points to growth for the quarter. An 11.4 percent increase in the rate
of car sales added 0.56 percentage points to growth. Medical care was
also a big factor, adding 0.55 percentage points and accounting for
more than 40 percent of the growth in the quarter. The savings rate was
-1.0 percent, up slightly from the -1.2 percent rate of the fourth
quarter. This was the eighth consecutive quarter of negative savings.
Housing investment declined at a 17.0 percent
annual rate, the sixth consecutive quarter of decline. Housing
investment is now 17 percent below its 2005 peak. The last time there
was such a sustained falloff in the housing sector was in the 1981-82
recession. With inventories of new and existing homes both at near
record levels, this decline is likely to continue.