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Wednesday, August 01, 2012

Q2 2012 GDP Details: Office and Mall Investment increases slightly, Single Family investment increases

by Calculated Risk on 8/01/2012 06:16:00 PM

The BEA released the underlying details today for the Q2 Advance GDP report.

The first graph shows investment in offices, malls and lodging as a percent of GDP. With the annual revisions, it now appears office, mall and lodging investment has increased slightly - but from a very low level.

Investment in offices is down about 61% from the peak (as a percent of GDP). With the high office vacancy rate, investment will probably not increase significantly (as a percent of GDP) for several years.

Office Investment as Percent of GDP Click on graph for larger image.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and is down about 59% from the peak (note that investment includes remodels, so this will not fall to zero).

Lodging investment peaked at 0.32% of GDP in Q2 2008 and is down about 75%.

Residential Investment ComponentsThe second graph is for Residential investment (RI) components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories (dormitories, manufactured homes).

Usually the most important components are investment in single family structures followed by home improvement.

Investment in single family structures is finally increasing after mostly moving sideways for almost three years (the increase in 2009-2010 was related to the housing tax credit).

Investment in home improvement was at a $158 billion Seasonally Adjusted Annual Rate (SAAR) in Q2 (just over 1.0% of GDP), significantly above the level of investment in single family structures of $122 billion (SAAR) (or 0.78% of GDP). Eventually single family structure investment will overtake home improvement as the largest category of residential investment.

Brokers' commissions increased slightly in Q2 as a percent of GDP. And investment in multifamily structures increased in Q2. This is a small category, and even though investment is increasing, the positive impact on GDP will be relatively small.

These graphs show there is currently very little investment in offices, malls and lodging. And residential investment is starting to pickup, but from a very low level.

All Housing Investment and Construction graphs