U.S. Business Investment Still Down in Q3

by: Howard Richman

The Bureau of Economic Analysis just released its third estimate of real economic growth for the third quarter of 2009:

  • 3.5% - this was the preliminary estimate issued October 29
  • 2.8% - this was the second estimate issued on November 24
  • 2.2% - this was the third estimate issued on December 22

The reasons that the BEA gave for the downward revision from the preliminary estimate to the second estimate were:

The second estimate ... primarily reflecting an upward revision to imports and downward revisions to personal consumption expenditures and to nonresidential fixed investment that were partly offset by an upward revision to exports.

The reasons that the BEA gave for the downward revision from the second estimate to the third estimate were:

The "third" estimate ... primarily reflecting downward revisions to nonresidential fixed investment, to private inventory investment, and to personal consumption expenditures.

The recurring theme was that residential fixed investment was less than estimated. It turns out that real fixed investment (combination of residential and non-residential) in the American economy did not rise from $1632 billion to $1641 billion (in 2005 dollars) as shown in the graph below: (Click to enlarge)


Instead it fell from $1632 billion to $1627 billion (in 2005 dollars) as shown below:

So far the Obama administration's attempts to revive the American economy have not resulted in increased business investment.

Disclosure: No Positions

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