With the gross domestic product eclipsing expectations in 2Q, the US appears to have avoided a long-predicted recession, even as the real estate industry remains mired in a deep contraction.
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The nation’s total economic output rose in the second quarter of 2023 at a rate that would amount to 2.4 percent over a full year, an acceleration in growth from the previous quarter on a seasonally adjusted basis, according to the latest report from the U.S. Bureau of Economic Analysis.
The latest numbers also beat expectations from some economists that growth would slow as the economy tipped closer toward recession.
Consumers and governments at all levels spent more in the second quarter of the year, helping to drive the growth. Investments in nonresidential assets — such as commercial structures, equipment and intellectual property — and private inventory also helped fuel the uptick in economic productivity.
Still the economy was held back by a reduction in exports and a housing industry that continues to trend downward — albeit at a slower pace than its plummeting trajectory throughout much of last year.
“The economy grew at a solid pace in the second quarter, supported by steady growth in consumer spending – clearly a reflection of the ongoing strength in the job market,” Mike Fratantoni, Mortgage Bankers Association chief economist, said in a statement. “However, the sharp drop in exports shows that this growth in the context of a weak global economy is creating a headwind for the economy along with the negative impact from restrictive monetary policy.”
Private residential investment was nearly 19 percent lower in the second quarter than at the same point last year, when the scales had just started to tip against industry activity. Since then, the freefall in housing productivity has slowed to an annualized rate of 4 percent in each of the last two quarters as the industry comes closer to finding its footing.
Sales of existing homes continued to weigh down the government’s measure of housing productivity, which includes broker’s commissions on sales in addition to the building of structures.
Moving forward, the existing sales market is likely to remain depressed while mortgage rates make moving a less attractive financial prospect for homeowners.
And that’s likely to remain a weight on the broader economy, Fratantoni said in the statement.
“New home construction is set to increase in the quarters ahead, but the weakness in the existing home market, which is much larger, means the housing sector as a whole is still subtracting from rather than contributing to overall growth,” Fratantoni said.