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Not a Beautiful First Quarter GDP Growth

Economic growth numbers for the first quarter will be announced next week, and it looks like it will be a huge miss. The numbers could well be just a hair above the zero growth line. The average growth rate from 1950 to 2000 was 3.7%. President Bush’s term from 2001 to 2008 generated an average GDP annual growth rate of 2.1%, while President Obama’s term yielded 1.5%. President Trump campaigned on pulling the economy back above 3%, and will therefore be sorely disappointed.

One big reason for the weak first quarter is that vehicle sales are no longer rising. After hitting over 18 million annualized vehicle sales in the final quarter of last year, the first quarter sales were 17.3 million. That figure is fine and healthy, but no longer rising. Even though consumer confidence has soared to a decade high, the actual consumer consumption increases have yet to play out. Retail sales have been solid with 5% growth, but more of the growth appears to be from price increases than from unit sale increases. Only the latter counts toward the GDP to reflect an improved standard of living.

 

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Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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