Weak foreign growth and the net appreciation of the dollar over the past two years have weighed heavily on net exports, corporate profitability, business investment, and manufacturing production. Business investment has declined in each of the past three quarters, and the latest data on housing permits suggest that residential investment slowed noticeably in the middle of this year.
As a result, economic activity over the past three quarters has been disappointing, with growth in GDP and gross domestic income each averaging less than 1 percent, a significant step-down from the same period in 2015. Looking ahead, the stabilization of the dollar and oil prices suggests that growth in these components should move higher over the second half of the year.