The national gross domestic product (GDP) growth was revised upwardly to an annual rate of 3.9 percent in the third and final estimate for the second quarter released by the Bureau of Economic Analysis (BEA) on Friday.
In the second estimate for Q2 released in August, real GDP grew at an annual rate of 3.7 percent; in the "advance estimate" released at the end of July, it grew at a rate of 2.3 percent. In the third and final estimate for Q1, GDP growth was a mere 0.6 percent, way below expectations.
"The acceleration in real GDP in the second quarter reflected an upturn in exports, an acceleration in personal consumption expenditures (PCEs), a deceleration in imports, an upturn in state and local government spending, and an acceleration in nonresidential fixed investment that were partly offset by decelerations in private inventory investment and in federal government spending," the BEA said in its report.
While the dramatic improvement in GDP growth for Q2 is a sign that the economy has rebounded from an extremely slow first quarter, housing's share of the GDP actually declined in Q2 down to 15.31 percent, according to Robert Dietz, VP for Tax and Market Analysis with the National Association of Home Builders. The home building and remodeling component of the GDP, otherwise known as the residential fixed investment (RFI), expanded for the third straight quarter up to 3.21 percent of the total GDP. Without that RFI expansion, the GDP growth would have been less for Q2, according to Dietz.
"For the second quarter, RFI was 3.21 percent of the economy, reaching a $524 billion seasonally adjusted annual pace (measured in inflation adjusted 2009 dollars)," Dietz said. "This is the highest quarterly rate for RFI since the first quarter of 2008. The second quarter growth for RFI added 0.3 points to the headline GDP growth rate (i.e. GDP would have expanded 3.6 percent absent the RFI contribution)."
Housing services, including gross rents paid by renters, owners' imputed rent (estimate of the cost to rent owner-occupied units), and utility payments combine to make up the second impact of housing on GDP. In Q2, housing services made up 12.1 percent of GDP growth, which calculates to an annual seasonally adjusted rate of $1.98 trillion. The 12.1 percent for housing services and 3.21 percent for RFI combined to make up housing's share of the GDP for Q2, which was 15.31 percent.
"Historically, RFI has averaged roughly 5 percent of GDP while housing services have averaged between 12 and 13 percent, for a combined 17 to 18 percent of GDP," Dietz said. "These shares tend to vary over the business cycle."