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Mann at Work

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.

Thursday, November 8, 2007

U.S. GDP Growth Fails to Forestall FOMC's Move to Cut Target Federal Funds Rate

Nov 8 2007 4:54AM | Permalink | Email this | Comments (0) |
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As expected, news of the 3.9% increase in U.S. GDP in third-quarter 2007 did nothing to forestall the Fed’s move to cut the target federal funds rate by another quarter point. From this week’s action, it is apparent that Fed’s primary focus is on preventing the problems in the housing market from spilling over into the larger U.S. economy.

In Canada, the story is quite different. Consulting economist John Clinkard writes that Canada’s headline inflation rate jumped from 1.7% to 2.5% in September 2007. If core inflation continues to creep higher, Clinkard predicts that the Bank of Canada “will be forced to adopt a more restrictive policy stance and raise interest rates in order to prevent inflationary expectations from escalating further.”

Federal Open Market Committee lowers target rate to 4.5%
The Federal Open Market Committee decided Wednesday, October 31 to lower its target for the federal funds rate 25 basis points to 4.5%.

Wednesday’s action should help combat some of the adverse effects on the broader economy that could come from disruptions in financial markets. The Committee also said that, after this week’s rate cut, the upside risks to inflation roughly balance the downside risks to growth.

Third-quarter advance* numbers show U.S. real GDP increase of 3.9%
October 31, 2007 – Real gross domestic product (GDP) in the United States increased at an annual rate of 3.9% in third-quarter 2007, compared to the second-quarter increase of 3.8%.

The increase in real GDP reflects positive results from the non-residential structures category. The categories below also made positive contributions:

  • Personal consumption expenditures (PCE);
  • Exports;
  • Federal government spending;
  • Equipment and software;
  • Private inventory investment; and
  • State and local government spending.

These positive results were partly offset by a negative contribution from residential fixed investment. Imports, a subtraction in the calculation of GDP, increased.

*The Bureau’s "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency. Third-quarter preliminary estimates based on more comprehensive data will be released on November 29, 2007.

Canada’s Real GDP increases in August
October 31, 2007 – Canadian economic activity increased 0.2% in August, which means it continues to maintain its average pace set at the beginning of 2007.

Here are the construction-related highlights:

  • In August, the construction sector advanced 0.5%, the fourth consecutive monthly increase.
  • A +0.1% gain in residential construction and +0.9% gain in engineering and repair work helped to offset the -0.2% slip in non-residential building.
  • While the construction of single-family homes declined, the construction of multi-unit structures and renovation work boomed.
  • An increase in industrial building was not enough to offset the decline in commercial and public building.
  • The home resale market fell sharply in August, due to significant declines in sales in Ontario and Quebec.

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