Thursday, October 30, 2008

Investment in Structures: Residential vs. Non-Residential

by Bill McBride on 10/30/2008 09:09:00 AM

The following graph shows residential investment compared to investment in non-residential structures as a percent of GDP since 1960. All data from the BEA.

Note: Residential investment is primarily single family structures, multi-family structures, commissions, and home improvement.

Investment RI and non-RI Click on graph for larger image in new window.

The recent housing boom and bust is very clear (in red).

Residential investment was 3.3% of GDP in Q3 2008, the lowest level since 1982 (just under 3.2%).

Non-residential investment in structures increased to almost 4% of GDP in Q3. This investment is slowing down right now (the Census Bureau has reported declines in non-residential investment for the last two months), and investment in non-residential structures will almost certainly be negative in Q4.

The positive contributions to GDP were exports, government spending, and investment in non-residential structures. Non-residential structures will be negative in Q4, and exports are slowing - so Q4 GDP will probably be much worse than Q3.

Note: I'll have much more on non-residential investment in offices, malls and hotels when the underlying details are released in a few days.