Residential Investment (RI) made a small positive contribution to GDP in the second half of 2009, but was a drag in Q1 2010. The rolling four quarter change is moving up, but as expected there has been no strong boost to GDP from RI. Equipment and software investment has made a positive contribution to GDP for three straight quarters (it is coincident). Nonresidential investment in structures continues to be a drag on the economy, and as usual the economy is recovering long before nonresidential investment in structures recovers. The key leading sector - residential investment - is lagging the recovery because of the huge overhang of existing inventory. Usually RI is a strong contributor to GDP growth and employment in the early stages of a recovery, but not this time - and this is a key reason why the recovery has been sluggish so far.
Sunday, May 2, 2010
Calculated Risk on residential investment
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