Posted February 2, 2015

Consumer Strength, Home Building Forecasted to Grow

The NAHB is forecasting improved economic growth for 2015. For the year, the association projects GDP to expand by 3.4%, an acceleration off the 2.4% rate for 2014. Higher levels of job creation, more economic growth and pent-up housing demand should also boost demand for home construction and remodeling, it says. 

The advance estimate from the Bureau of Economic Analysis indicates that Gross Domestic Product (GDP) increased at a 2.6% annual rate. This was below expectations (generally around 3%).

While a “miss,” the first estimate of growth for the final quarter of 2014 includes some notable elements of optimism. In particular, consumers – benefiting from improved balance sheets (in part due to higher home values) and reduced gas prices - showed strength. Personal consumption expenditures expanded at a 4.3% annual rate for the quarter, exceeding expectations.

Residential fixed investment (RFI or home building and remodeling) grew at a 4.1% rate for the fourth quarter. RFI has now expanded for three consecutive quarters, after weakness at the end of 2013 and the start of 2014 due to an increase in interest rates and weather impacts. Click here for the National Association of Home Builders press release. 

Meanwhile, economic blogger Anthony Sanders, Distinguished Professor of Finance in the School of Management at George Mason University, emphasizes that despite lower gasoline prices, consumer spending in December fell by the most since September of 2009. You can find his post here.