More Signs Point To A Slowdown In Q1 U.S. Growth
Beginning in autumn 2013 and continuing through spring 2014, the housing market stalled in response to higher interest rates. Because of that, I anticipated an economic slowdown at about the end of 2014. More signs are emerging that the slowdown has occurred.
First of all, here’s a look at housing permits (blue, averaged quarterly YoY) with real YoY GDP (red):
While there is no 1:1 correspondence, the leading nature of housing is clear.
Yesterday ISM manufacturing for February was reported as the least positive in 13 months:
Building construction declined (red in the graph below) -1.1% in January, and has been negative YoY for the last 3 months. I’ve also included monthly housing permits (blue), to show you that construction follows permits with a lag:
Now here is an update of the Atlanta Fed’s GDPNow calculations after yesterday’s economic data:
The forecast has now declined to +1.2% annualized.
Last year the housing market never really went negative, nor did that other big consumer durable purchase, motor vehicles. So, while I think we are seeing a real slowdown, undoubtedly also influenced by developments like the West Coast port strike, weakness in Europe, and strength in the dollar, I do not believe this is in any way a recession indicator, and I believe it will be transitory.
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