The FTI Consulting Economic & Real Estate Report - 2nd Quarter 2013

The FTI Consulting Economic & Real Estate Report - 2nd Quarter 2013

Real Estate & Infrastructure

September 12, 2013

Although the first advance estimate of 2Q13 gross domestic product (GDP) showed the U.S. economy accelerated at a 1.7% annualized rate from a downwardly revised 1.1% in the prior quarter, the latest reading marked the third straight quarter in which GDP growth was below 2.0%. These numbers are an indication that the U.S. economy still has difficulty in gaining prolonged momentum due to increased taxes, federal budget cuts and slow growth overseas. On the positive, broad revisions to GDP showed the economy expanded at a stronger pace (2.8%) versus the previous estimate (2.2%) during 2012.

The U.S economy added 195,000 jobs in June and employment figures were revised upwards by a combined 70,000 in April and May. Sustained labor growth has resulted in the creation of roughly 202,000 new payroll jobs per month since 2012; however, the unemployment rate, at 7.6%, has moved little since 2012.

Despite subpar GDP output, key cyclical drivers and economic indicators, some of which are summarized below, have indicated growing future optimism.

  • The housing market recovery continued, driven by low mortgage rates, falling inventories and rising prices. Case-Shiller reported increases in home prices for the twelfth straight month and is up 12.2% year-over-year on average as of May 2013.
  • The National Association of Realtors reported that sales of existing homes remained 15.2% above the 4.41 million-unit pace recorded in June 2012.
  • Measures of consumer confidence moved to their highest point since January 2008 in June, the annualized rate of motor vehicles sales was the best since 2007, and the June NAHB/ Wells Fargo Homebuilders’ Index reached its strongest level since January 2006.
  • Additionally, durable goods orders, industrial production and the ISM index all increased in June.
  • The Dow Jones Industrial Average set an all-time high in May before retreating somewhat in June.

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