Norada Real Estate Investments

US Economy Surpasses Expectations with Strong Growth in 2023

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The United States economy exhibited remarkable resilience as it closed out the year 2023 with a robust performance, surpassing earlier predictions. The advance estimate of the fourth-quarter Gross Domestic Product (GDP) revealed a surprising annualized growth rate of 3.3%, defying consensus forecasts that had anticipated a more modest 2%, according to data released by the Bureau of Economic Analysis.

“That is three years in a row of growing the economy from the middle out and the bottom up on my watch,” President Biden said in a statement this Thursday morning.

Key Contributors to Growth

The expansion in real GDP was fueled by notable increases across various sectors, including:

  • Consumer Spending: Witnessed growth in both services and goods, with significant contributions from food services, accommodations, health care, and various goods categories.
  • Exports: Marked increases in both goods and services, led by petroleum and financial services, respectively.
  • Government Spending: Noteworthy rises in state and local government spending, nonresidential fixed investment, and federal government spending.
  • Inventory Investment: Led by wholesale trade industries.
  • Residential Fixed Investment: Driven by an increase in new residential structures.

However, it's essential to note that the positive momentum was partially offset by an increase in imports, which subtract from the GDP calculation.

Quarterly Performance and Deceleration

Compared to the third quarter of 2023, the fourth quarter exhibited a deceleration in real GDP, primarily attributed to slowdowns in private inventory investment, federal government spending, residential fixed investment, and consumer spending. Imports also decelerated during this period.

Overview of Current-Dollar GDP and Price Indices

The current-dollar GDP increased by 4.8% at an annual rate in the fourth quarter, reaching a level of $27.94 trillion. The price index for gross domestic purchases increased by 1.9% in the same period, reflecting a slight slowdown compared to the third quarter.

Personal Income and Saving Trends

Personal income exhibited a notable increase of $224.8 billion in the fourth quarter, primarily driven by rises in compensation, personal income receipts on assets, and proprietors' income. Disposable personal income increased by $211.7 billion, with real disposable personal income showing a substantial rise of 2.5%.

Despite the increase in personal income, personal saving slightly decreased to $818.9 billion in the fourth quarter, with the personal saving rate standing at 4.0% compared to 4.2% in the third quarter.

Annual Performance and GDP for 2023

Real GDP for the entire year of 2023 exhibited a noteworthy 2.5% increase compared to 2022. This growth was primarily driven by consumer spending, nonresidential fixed investment, state and local government spending, exports, and federal government spending.

While the increase in consumer spending was fueled by services and goods, the decrease in residential fixed investment was mainly attributed to a decline in new single-family construction and brokers' commissions.

Current-dollar GDP for 2023 increased by 6.3%, reaching a level of $27.36 trillion. The price index for gross domestic purchases increased by 3.4%, showing a moderation compared to the previous year.

Year-on-Year Growth and Price Index Trends

Measured from the fourth quarter of 2022 to the fourth quarter of 2023, real GDP increased by 3.1%. The corresponding price indices showed increases of 2.4% for gross domestic purchases, 2.7% for the PCE price index, and 3.2% for the PCE price index excluding food and energy.

This positive economic performance marks a promising outlook for the United States as it navigates through the intricate landscape of global economic dynamics.

National Economic Outlook (September 2013)

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The rate of annual job growth in August, 1.7 percent, was basically the same as in previous months. We had better get used to the idea that this is the new normal, because there probably won't be much help from the lagging government and construction sectors.

Budget difficulties will prevent any meaningful increase in government spending, even though local and state revenues are now in better shape. The recession revealed the extent of unfunded pension liabilities for public employees, which will absorb any extra dollars.

[Read more…]

National Economic Outlook (August 2013)

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The pace of job growth in July was unchanged from the 1.7 percent annual rate of previous months, but the details suggest an economy that will do modestly better for the rest of the year. Most importantly, jobs in business services were up 3.5 percent from last year.

Business services is one of the largest sectors of the economy, on a par with health care and government, and bigger than retail or manufacturing. Earlier this year it was growing at a 3 percent rate, in the last few months around 3.5 percent; it seems only a small increase but it means that businesses are expanding again.

[Read more…]

National Economic Outlook (June 2013)

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The economic recession only lasted a year, but there wasn't a recovery for homes because prices had climbed much too high and builders had built way too many of them. Prices had to fall, not just back to a “normal” level, but to an even lower level so that the large inventory of excess homes could be moved – a sort of clearance sale. We're not yet done with that sale – see the large number of mortgages still delinquent – but enough has been cleared out so that prices can drift up to a more normal level.

 

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U.S. Population Shifts

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People were on the move in 2012 and apparently the most popular place for them to move to was Pittsburgh, PA., according to the 2012 Top US Growth Cities Report recently released by U-Haul International.  The Steel City topped the list of 30 metro areas selected with a 9.04% population growth, based on data collected by U-Haul from over 1.6 million one-way truck rentals during a recent 12 month period.

The cities chosen for the list had more than 5,000 families moving in or out of the area during that time.   “Growth cities were then determined by calculating the percentage of inbound moves vs. outbound moves for each area,” said John Taylor, president of U-Haul International, Inc.   Other cities in the U-Haul top 10 included:
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National Economic Outlook (March 2013)

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The budget shenanigans in Washington so far haven't had an effect on the recovery, but an extended period of lower government spending and job cuts will quickly lead to economic stagnation.

The economy is a self-reinforcing mechanism, a small dip in growth will be followed by further declines, even if the first dip was meant to be temporary. With jobs growing at a very modest rate, it won't take much to bring growth to a halt.

Aside from the very real possibility of a government-induced slowdown, the economy is doing well – in the modern sense that it's growing modestly. The number of jobs in February was 1.5 percent higher than last year, a small improvement over recent months, and unemployment fell to 7.7 percent. As usual, the heavy lifting was done by the health care sector – jobs up 2.1 percent – and business services, where jobs increased 2.8 percent. Government jobs were essentially flat, and retail jobs were up 1.8 percent.

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Housing: Is It Becoming a Seller's Market?

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The National Association of Realtors said on Thursday what home buyers and real estate investors in many parts of the United States have known for months: it’s becoming a seller’s market.

The number of homes listed for sale in January fell by 4.9%, leaving 1.74 million properties on the market. That’s the lowest since December of 1999, when there were 1.71 million homes on the market. By contrast, there were 2.91 million homes on the market two years ago at this time.

After adjusting for seasonal factors, home sales rose by just 0.4% in January, to an annual rate of 4.92 million units. Still, that’s up from 9.1% one year ago.

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National Economic Outlook (February 2013)

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Home construction rarely matches the actual demand for new homes, which can change quickly – there's often too much or too little. Because the US population grows one percent per year about 1.5 million new homes are needed every year. During the boom of the mid-2000s, two million homes were built per year; at the bottom of the bust, that number was 600,000.

In 2012, construction was up to 800,000 homes. This is a clear indicator that demand is even higher and will continue higher for years. Home prices will be rising even when more construction takes place. The economic effect is self-reinforcing because most of the cost of building a new home is in the wages paid to the workers, who in turn can afford a better home for themselves or spend money on cars and other stuff.

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National Economic Outlook (December 2012)

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It's becoming clear to me that what we've been thinking of as a stage in the recovery actually is the recovery. Job growth at a 1.5 percent annual rate is well below our hopes from previous cycles but its getting hard to imagine faster growth unless the government starts spending more money (ha-ha) or consumers like their finances enough to start clamoring for new homes.

In November, jobs increased by 1.4 percent from last year and unemployment eased to 7.7 percent, basically no change from what we've seen the last six months. Jobs were up 1.4 percent in manufacturing, 1.5 percent in retail trade, 3 percent in business services, 2.2 percent in health care, and 2.7 percent at restaurants. Jobs in government and construction were flat.

[Read more…]

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