Friday, October 27, 2006

Housing Market a Drag on Economic Growth

Hmmm, where have I heard this before? Housing and a bloated trade deficit slowing economic growth?

Housing Market a Drag on Economic Growth

WASHINGTON (AP) --Economic growth slowed to a crawl in the third quarter, advancing at a pace of just 1.6 percent, the worst in more than three years.

The latest snapshot of the economy, released by the Commerce Department on Friday, showed that the slumping housing market figured prominently in the economy's dramatic loss of momentum. Investment in homebuilding was cut by the biggest amount since early 1991.

The reading on gross domestic product was weaker than the 2.1 percent pace many economists were forecasting. ''The housing bubble burst and that really knocked down growth,'' said Joel Naroff, president of Naroff Economic Advisors.

The third quarter's 1.6 percent growth rate was the weakest since the first quarter of 2003, when the economy grew at a 1.2 percent annual rate.

The economy's softness in the third quarter stemmed in large part from the cool down in the once-hot housing market.

Spending on home building dropped at a rate of 17.4 percent in the third quarter. That was the biggest drop since the first quarter of 1991 when such spending was sliced at a 21.7 percent pace.

Weak inventory building by businesses and the bloated trade deficit also played roles in weighing down economic activity in the third quarter.

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