Spring thaw for U.S. economy?

August 11, 2010

The recent roller-coaster ride of the stock market has led construction and design professionals to revisit their business strategies for the coming year. While a recession still seems unlikely, the number of new projects has shrunk with overall economic indicators.

'A lot of air was let out of the U.S. economic balloon during the second half of 2000, and we've experienced increasing turbulence in recent months,' notes Daryl Delano, group economist with New York City-based Cahners Business Information, citing preliminary U.S. Department of Commerce estimates from late last year. Adjusted for inflation, growth in gross domestic product (GDP) slowed to an annual rate of just 1.1 percent during the final quarter of last year, and third-quarter GDP gains were revised to 2.2 percent - not the 2.7 originally estimated. 'This was quite a comedown from the previous four quarters,' Delano says, 'which averaged 6.1 percent.'

Still, by any measure, last year's economic performance was the strongest since 1984: year-2000 GDP beat 1999 figures by 5 percent. But the final quarter's tiny gain, the smallest since 1995, was unsettling for investors. Add to that a paltry gain in consumer spending, a decline for consumer durables, a drop in residential construction and surprising absolute declines in business investment spending and export sales - whew - and the stage is set for the chicken-littles.

Buildings on the rise

Yet, the sky isn't falling that fast: Business investment in buildings grew at a healthy rate through the final months of 2000 even as spending for new equipment - trucks, computers - plummeted.

What should one make of the mixed news? Watch business spending, says Delano: The measure has jumped by double-digit rates every year since 1993, averaging 12.7 percent. 'Such a dramatic late-year plunge in this driver . has to be of real concern,' he says.

2000 economic growth stalled at year's end (Annual percent change, inflation adjusted)



Q1 Q2 Q3 Q4

Overall gross domestic product (GDP)

4.8

5.6

2.2

1.1

Personal consumption spending

7.6

3.1

4.5

2.8

Durable goods

23.6

-5.0

7.6

-2.8

Nondurable goods

6.0

3.6

4.7

0.8

Services

5.2

4.6

3.7

5.0

Business investment

21.0

14.6

7.7

-0.6

Equipment and software

20.6

17.9

5.6

-3.5

Buildings

22.3

4.4

14.6

8.8

Home building and remodeling

3.2

1.3

-10.6

-3.4



Source: U.S. Department of Commerce

         
 

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