David Rosenberg on Canadian housing and GDP growth


New Forum Member
Aug 29, 2007
Interesting analysis by economist David Rosenberg on the role of housing in the recent economic recovery in Canada.

"We did a bottom-up accounting from the GDP data to see just how much of the post-recession recovery in Canada has been due to the direct and indirect effects from the housing boom. Part of that indirect impact comes via the “wealth effect” on consumer spending from the 20% YoY surge in home values seeing as housing comprises nearly one-quarter of the asset base in the household sector. In Canada, this means that every dollar increase in housing wealth translates into 7-9 cents of incremental spending in the GDP accounts. Housing has tremendous spin-off effects outside of the “wealth effect” — the impact on building materials, real estate income, legal services, architecture billing, classified ads, infrastructure, etc — and it’s all locally-driven (ie, marginal import leakage).

Based on our statistical work, around half of the 7% annualized growth rate in nominal GDP from the recession trough has been due to the combined direct and indirect benefits from the housing boom. And, when we apply the price deflators to the various sectors of GDP, we actually find that every penny of economic activity, in real terms since this recovery began, has occurred thanks to the housing sector. In other words, if not for housing real GDP would have stagnated since Q2 2009 instead of rebounding at a 3% annualized pace"

The fool report attached.
(Link to the article - requires free registration - https://ems.gluskinsheff.net/Login.aspx?Ret...ave_042310.pdf)