Lower borrowing costs should support residential investment. In last year’s third quarter, homebuilding finally contributed to GDP after subtracting for nine straight quarters. Still, the risk is that any lift will be tempered by a lack of affordable housing, according to Beth Ann Bovino, chief economist at US Bank.
“Because the housing market is so tight, prices haven’t really come down dramatically, and that squeezes people out of the market,” Bovino said.
Lingering Concerns
Corporate investment may also remain muted. Businesses are facing a litany of concerns amid weak foreign growth, uncertainty ahead of elections in November and questions about the sustainability of domestic demand.
Even so, early indications from the latest earnings reporting season now underway suggest consumers remain resilient. Andre Schulten, the chief financial officer of household-products giant Procter & Gamble, told analysts Tuesday after the company’s earnings results that “the US continues to be very solid, continues to impress.”
Combined spending by households and governments should continue to offset lackluster investment figures, said Steven Ricchiuto, the chief US economist at Mizuho Securities USA.
“The consumer continues to spend enough with a little bit of government spending coming in, very little inventory being accumulated, very little boost coming from trade, no plus-or-minus from residential or commercial real estate, no real corporate investment expenditures on equipment,” Ricchiuto said.
“It’s up to the consumer and the government. Between the two of them, they can get you 2% growth on average.”
This article was provided by Bloomberg News.