•Press Release
January 30, 2008 (GDP Byte)
GDP Byte by Dean Baker
For Immediate Release: January 30, 2008
Contact: Alan Barber, (202) 293-5380 x115
Non-residential construction has risen by 30.2 percent in the last two years.
GDP eked out a 0.6 percent gain in the fourth quarter driven primarily by a 2.0 percent increase in consumption for the quarter. Non-residential structures, net exports, and state and local government spending each added close to a half percentage point to growth while housing and inventories were both major drags on growth.
The growth in consumption was impressive given the quarter’s weak job growth, declining real wages and plunging house prices. The savings rate fell to just 0.2 percent for the quarter, bringing the rate for the year to 0.5 percent, almost identical to the rates for 2005 and 2006. Within consumption, durable goods showed the strongest gains, rising at a 4.2 percent rate. This in turn was driven by an 8.0 percent growth rate in the category of “furniture and household equipment.” This is most likely explained by a surge in purchases of appliances like flat screen televisions, since the plunge in home sales is depressing the sale of furniture. Much of this increase reflects declining prices. The nominal growth rate in this category was just 1.8 percent.
Other consumption spending grew slowly, with spending in non-durables rising at a 1.9 percent rate and services at a 1.6 percent rate. Excluding rent and medical care, spending on services declined in the quarter.
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