Some declines in residential investment could be large, and could contribute to some volatile numbers for overall GDP growth on a quarter-by-quarter basis. But currently we do not see the slowing in housing markets spilling over into a more prolonged period of weakness in the overall economy. So on balance, we expect GDP growth to average somewhat below potential over the next year or so...
But we cannot forget the plus side of the ledger. Outside of housing, there do not appear to be any imbalances that would foreshadow large adjustments in spending in other sectors. And, as I noted earlier, income growth and spending should be supported by the trends in productivity, recent oil price declines, and improved growth prospects for many of our trading partners.