A running estimate of real GDP growth using incoming monthly releases and transparent component contributions.
My Q3 GDP nowcast slipped another 0.01 percentage point today, moving from 3.06% to 3.05% annualized. That works out to roughly 0.76% growth quarter over quarter.
There was very little movement in the model today, and essentially all of it came from residential investment. That makes this less of a change in the overall Q3 outlook and more of a continuation of something that has been showing up in the data for a while: housing remains one of the weaker parts of an otherwise fairly strong GDP picture.
The latest building-permit data are actually more encouraging than the change in the nowcast might suggest. July permits were running at a seasonally adjusted annual rate of 1.443 million, up 5.0% from June. Single-family permits increased 2.5% to an 894,000 annual rate.
The problem is that permits are only one part of the housing picture. Actual housing starts fell sharply in July, dropping 12.4% from June to a 1.239 million annual rate. Single-family starts fell 9.9%. In other words, the pipeline for future construction improved while construction actually getting underway weakened considerably.
That distinction matters for the GDP calculation. Residential investment measures actual economic activity rather than simply the number of projects authorized for construction. The better permit numbers therefore provide some support for activity later in the quarter, but they do not erase the weakness already showing up in starts and other housing data.
My residential investment contribution consequently slipped another 0.01 percentage point today and now stands at -0.18 percentage points for Q3.
The rest of the model was effectively unchanged.
Consumer spending remains by far the largest source of growth, currently contributing 3.17 percentage points. Business fixed investment is adding another 0.37 points, while inventories contribute 0.33 points and government spending adds 0.07 points.
Net exports remain the largest drag at -0.71 percentage points. There was effectively no meaningful change in that contribution today, so I would not read anything new into the trade side of the model from this update.
Put together, the current picture is still one of fairly strong Q3 growth with a noticeable split underneath it. Consumer spending and business investment are doing most of the work, inventories are providing some additional support, while housing and net exports are pulling growth in the other direction.
Today's move from 3.06% to 3.05% does not change that story. What I will be watching is whether the improvement in building permits eventually turns into stronger starts and construction activity. If it does, the residential drag could begin to fade later in the quarter. If builders continue obtaining permits without moving projects into construction, housing will remain a weak spot in the Q3 numbers.
You can follow the latest GDP nowcast, contribution estimates and future updates at GDP Dynamics.