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Many Bright Spots in U.S. Economic Performance, Forecasts

Latest News > Industry News

Despite gasoline prices spiking above $3 a gallon at the pump, the continued housing slump and consumer spending losing some of its steam, the recent performance of the U.S. economy and indicators for the near future show renewed signs of strength.

  • Economic indicators for non-residential construction are positive
  • All economic factors in the non-residential construction market are positive except those for manufacturing plants, writes Jim Haughey, director of economics, Reed Business Data for the company's Building Team Forecast website. "For commercial real estate, rental rates are rising strongly, vacancy rates are falling slowly and new-space demand is anticipated to be enough to absorb most of the surge of new space becoming available over the rest of this year," he said. "For institutional buildings, construction funds from current taxes or service charges, budget reserves or investment returns, remain generous. Reed Construction Data reports that the value of non-residential starts is up 23% through April 2007 compared to the same period last year. The environment is as good as it ever gets in this market," Haughey added.

  • New home sales take a big jump in April
  • Even the residential market, where most indicators continue to point downward, posted some good news. New home sales rose 16% in April, to an annual pace of 981,000. This was the biggest monthly increase in 14 years. Much of the increase was spurred by lower prices , driven in large part by big incentives offered by many builders. The median price of a new home in April dropped by 11.1% versus March, another record for the month.

    Overall housing starts edged up 2.5%, month over month. However the market is still glutted with unsold homes, which suggests that residential building will continue to slow economic growth at least through the end of this year and possibly for much of 2008.

  • Durable goods orders rise for third month in April
  • Orders for U.S. durable goods rose in April for the third straight month, according to the U.S. Census Bureau. Sales rose 0.9% in April. At the same time, the Bureau revised March sales upward to 5.0%. April's performance follows a poor performance through the first quarter of the year. The segment now seems more likely to support U.S. economic growth throughout the year.

  • Consumer spending rate slow
  • Economists credit consumers for sustaining U.S. economic growth in the face of high gas prices and the housing slump. They continued to spend more in April, but at a much slower pace than March. Consumer spending rose only 0.3%, according to the U.S. Commerce Department. In, March, the rate was 0.7%.

  • Fed chairman remains positive
  • Federal Reserve Chairman Ben S. Bernanke continues to assert that the U.S. economy remains on a growth path. Even though housing continues to be a drag, "the economy sees likely to continue to expand at a moderate pace over coming quarters," he said.