Analysis by Ken Fears and Jed Smith

1
Gross Domestic Product 2007 Q4 1st Revision
Analysis by Ken Fears and Jed Smith NAR
Research Date Released 2-28-2008 Data Source
Bureau of Economic Analysis
2
GDP Growth (Inflation adjusted using 2000 chain
prices)
(annualized rate)

• The revised reading on the fourth quarter data
  still shows a stalling economy.
• GDP grew just 0.6. (Historical average is 3)
  
• There was no upward revision to last months
  preliminary headline figure for the fourth
  quarter. There is one final revision to this
  figure due in March, but expect something similar
  with essentially no growth.

3
GDP Growth (from a year ago over a longer term
time span)
(change from a year ago)

• On a more stable year-over-year reading, the
  economy grew by 2.5.
• The last economic recession was in 2001 a very
  mild one by historical standards.

4
Consumer Spending
(change from a year ago)

• Personal consumption expenditure rose by 2.5
  from a year ago.
• Surprisingly resilient despite high energy cost
  and stagnant home price growth.
• Aggregate job and income gains are providing the
  funding for spending.

5
Business Spending(Private non-residential fixed
investment)
(change from a year ago)

• The 7.3 expansion is solid revised down from
  7.4 last month.
• Spending is supported by near record corporate
  profits. Financial companies
• are writing-down subprime losses and homebuilders
  are struggling, but companies
• outside of these areas are doing quite well.

6
Residential Construction(Private non-residential
fixed investment)
(change from a year ago)

• 18.6 decline in residential construction (from
  fewer housing starts/completions)
• is the key reason in holding back the overall
  economy.
• Anticipate continue weakness in new home
  building throughout 2008.
• This figure was revised downward slightly from a
  18.3 decline to 18.6.

7
Government Spending
(change from a year ago)

• So far, nothing striking, but a slight 0.1
  downward revision to 2.4.
• Could decelerate in 2008 as local government
  spending pulls back in light of
• weaker property tax collection.

8
Net Exports
billion

• Exports have been rising steadily and thereby
  reducing trade deficit
• Net exports were revised down from 521.0
  billion to 506.7 billion
• A weak dollar and a fairly solid global economy
  have permitted greater U.S. exports.
• High energy cost continues to weigh on imports

9
Summary

• Very weak GDP growth rate in the fourth quarter.
• However, the economy will most likely avoid
  recession.
• Business inventory is getting drained and there
  will be an uptick in production to restock
  inventory in 2008.
• Business spending will remain positive and
  exports will continue to expand solidly.
• Consumer spending will undoubtedly decelerate due
  to loss in confidence and loss in housing wealth.
  
• GDP forecast for 2008 is not a recession but a
  sub-par growth rate of 2.2.