U.S. Housing Still Strong As GDP Remains Weak

By John S. McClenahen At the Chicago-based National Association of Realtors (NAR), they're talking about 2003 being the second-best year ever for housing. "There's a huge momentum of sales activity continuing, and we're now at a much more sustainable level for home sales going forward," says David Lereah, NAR's chief economist. After a surge early this year, sales of existing homes in the U.S. fell 5.6% from February to a seasonally adjusted annual rate of 5.53 million units in March. Meanwhile, U.S. Commerce Department and Department of Housing and Urban Development data show that sales of new one-family homes were at a seasonally adjusted annual rate of 1.012 million in March. That was 7.3% above the revised February rate of 943,000. And in its first official estimate of GDP for this year's January-through-March quarter, the Commerce Department reports that the U.S. economy grew at an annual rate of 1.6%. That's a bit better than the 1.4% increase in GDP recorded in the final calendar quarter of 2002, but well below the 2% rate expected by David A. Rosenberg, chief North American economist at Merrill Lynch & Co., New York. "While the economy is not 'double-dipping,' it certainly has a 'recession' feel to it," says Rosenberg. "GDP is growing at roughly half its potential, and the output gap is widening. This excess capacity reinforces disinflation pressure and causes pricing power to remain an elusive concept for the corporate sector." Particularly troubling to Jerry J. Jasinowski, president of the Washington, D.C.-based National Association of Manufacturers, is the 4.2% decline in business investment in plant and equipment during the first quarter of 2003. "Generating fast-enough growth to begin to create jobs, substantially improve confidence and prompt a meaningful investment recovery will depend on Congress and the Administration working together to pass an economic growth program that benefits industry, workers and investors by midyear," says Jasinowski.

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