Economic growth

According to Reed Construction Data's latest Building Team Forecast, real (inflation-adjusted) U.S. economic growth fell to 0.6 percent (annualized) in the winter quarter, under pressure from the housing collapse and persistently high energy prices, which led to a short period of manufacturing and distribution inventory surpluses. Gross Domestic Product (GDP) growth will recover to a 3 percent pace by the end of the year and through 2008. Although the rebound is still fragile, there is little risk that it will be unsuccessful. The huge service sector of the economy is booming, especially financial and professional office-based services. The strong growth in both exports and business investment paused during the winter, but are already expanding quickly again. More than a year of sub-par growth has created slack in the economy, although not in non-residential construction, which assures steady credit costs and some lessening of materials and wage inflation. Inevitably, the period of relatively slow economic growth also saps demand for building space and facilities and will cause a similar slow period ahead for starts of non-residential buildings. Energy prices, while still high, are no longer rising and are likely to fall marginally for the rest of the year. Housing starts appear to be at the low point for this cycle, although a few more months of small declines are possible. Starts were balanced with completions in April, but need to fall slightly to line up with permits and a small excess of units under construction. Factory production has been rising since February and manufacturers’ inventories began climbing in April. This time the rise is to refill the distribution pipeline and not due to unexpectedly low sales as happened about a year ago. Your comment?