- by New Deal democrat
This morning's release of Q4 2017 GDP was in line with estimates, rising 2.7% on a preliminary basis. As usual, my attention is focused less on where we *are* than where we *will be* in the months and quarters ahead.
There are two leading components of the GDP report: real private residential investment and corporate profits. Because the latter will not be released until the second or third revision of the report, I make use of proprietors' income as a more timely if less reliable placeholder.
So let's take a look at each.
The news on real private residential fixed investment was mixed. Measured both by itself (blue), and by the more precise method of its share of the GDP as a whole (red), residential investment rose. But although it came close, it has not made a new high since three quarters ago:
Proprietors' income was clearer, breaking out to another new high:
Together these are pretty strong evidence that the economy will continue to expand through the rest of 2018.
One final note: although the GDP reports have been good for the last three quarters, I'm not expecting any big positive breakout. This goes back to the relative flatness or restrained growth in housing. The below two graphs show the leading relationship between housing permits (using the less volatile single family measure) and GDP broken up into two roughly 30 year periods:
The YoY% change in permits for the last 3 years has been roughly 10% (divided by 4 for purposes of scale in the above graphs shows a number of ~2.5%). While there is certainly not a 1:1 relationship in the numbers, continued roughly 2.5% YoY growth of GDP for the next few quarters is a reasonable projection.
