GDP Growth Remains Sluggish

December 2, 2008--In its latest estimate of third quarter economic activity, the Bureau of Economic Activity lowered its estimate of gross domestic product growth. Home sales are still sluggish. Existing home sales and new home sales both fell in October.

 

Gross Domestic Product
The Bureau of Economic Analysis downwardly revised its third quarter gross domestic product (GDP) growth estimate to -0.5% annualized growth, down from -0.3% in its previous report. Downward revisions were made to consumer spending and exports, which were greater than the upward revision to inventory investment and the downward revisions made to imports, which is a positive in the report. Continued economic decline is expected into 2009 as the shakeout in the finance industry may freeze credit markets and hamper business and consumer lending.

 

Existing Home Sales
The National Association of Realtors reported that existing home sales fell 3.1% month over month in October, offsetting much of the 4.7% increase in September. Available inventory remained high, at 10.2 months, in October. The median price for a home fell from $191,400 to $183,300. Compared to one year ago, existing home sales are off more than 11% due to the worldwide financial crisis and a domestic recession.

 

New Home Sales
In October, new home sales decreased 5.3%, to 433,000 units, compared to a 0.7% increase in sales in September. Compared to October 2007, new home sales plummeted 40.1%. Inventory of new homes increased to 11.1 months during October. New home sales are expected to remain weak going forward, as potential buyers face stricter lending terms and harbor expectations of continuing price declines.