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Reed Construction Data editor Denise Mann gathers North American construction-related economic announcements from around the Web and summarizes them just for BuildingTeam Forecast readers. Your feedback and suggestions for future topics to be covered are always welcome.

Friday, June 1, 2007

U.S. Real GDP Lower than Expected; Strong Canadian Rate Raises Spectre of Future Interest Rate Hike

Jun 1 2007 1:48PM | Permalink | Email this | Comments (0) |
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Both Canada and the U.S. released their first-quarter 2007 real GDP figures today.

U.S. GDP slowed to a 0.6% seasonally adjusted annual rate, its worst quarter in over four years and half the level anticipated in the advanced estimates released last month.

Meanwhile, the annualized rate of real GDP growth in Canada was a strong 3.7%, versus 1.5% in fourth-quarter 2006 and 2.8% for all of 2006. This latest figure seems to confirm widespread opinion that the Bank of Canada will announce an increase in its overnight rate in July.

One note of caution for Canadian construction-industry watchers: the rate of non-residential business investment dropped to +5.3%, down from rates of in excess of 10% recorded over the past two years.

More details on today’s announcements can be found below. As always, please feel free to add your comments on the day’s news by clicking on the “Comments” link above.

U.S. real GDP figure for first-quarter 2007 revised downward
Last month, the advance estimated increase in U.S. real gross domestic product (GDP) was 1.3%, but today’s preliminary estimates show it has slowed noticeably. In the first quarter of 2007, according to the Bureau of Economic Analysis, real GDP dropped to an annual rate* of just 0.6%, less than half the BEA’s original estimate.

The BEA says that lower business inventories and higher imports were the main contributors to the slower rate of increase.

*Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. "Real" estimates are in chained (2000) dollars.

Canadian real GDP steams ahead 0.9%, thanks to consumer spending and residential investment
In first-quarter 2007, Canadian real gross domestic product (GDP) advanced at more than twice the pace of last quarter. In particular, personal spending on goods and services continued its support of the economy, rising +1.0% in the quarter versus the previous quarter.

Of particular interest to the construction industry, Statistics Canada also revealed that residential investment rose, while investment in non-residential structures stumbled. Business investment in residential construction rose +1.8% in the first quarter, the first increase since first-quarter 2006.

For more than two years, business investment in non-residential structures has maintained a steady pace of quarterly increases in the range of 2.5% or more. In this quarter, it slowed to +1.3%, despite a 2.5% surge in investment in buildings, such as office buildings, factories and warehouses.

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