Yep, There's a Housing Slowdown -- And Business Spending's Not Picking Up the Slack

by: William Trent, CFA

As if we needed any more proof, we were able to draw up this nifty little chart from this morning’s GDP Release. It shows the direct contribution to GDP growth (i.e. the 2.9% headline number in today’s release) that was contributed by growth in residential fixed investment (source: Bureau of Economic Analysis).

Keep in mind, this shows only the direct impact, on housing construction itself. The total effect will include mortgage brokerage, real estate brokerage and any impact on consumer spending.


We posted a month ago about how business spending (20 percent of GDP) would have a hard time making up for a consumer (60 percent of GDP) slowdown, but noted last week that the orders and sales for durable goods were stronger than the headline suggested.

Now this. The red bars show the year/year growth in GDP, which has been much smoother than those erratic numbers we get by seasonally adjusting quarterly data and then annualizing it. (Anyone else think the seasonal adjustments must be a little fishy?) The blue line is business spending on tech equipment and software, which is really starting to look tired.


The mixed data shows why both the Fed and the markets are indecisive of late. For tech spending, it all may rest on acceptance of Microsoft (NASDAQ:MSFT) Vista.

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