Non Residential Fixed Investment in Equipment and Software – what most people are thinking of when they use the word investment – has been surging over this recovery.
Here is levels
Here is growth rate
I’ve seen some private analysts reports that have this slowing down over the coming year, presumably because we will return to trend. They are looking at this as a bounce back.
Right now, I don’t see any reason to think that’s true. As absolutely insane as it sounds, my baseline has to be for the growth here to accelerate in 2012.
That’s because we you decompose this you see that its not really the case that “Business Investment has returned to trend”
What happened is that the non-tech parts of business investment – transportation equipment largely – got hammered right along with the rest of the economy and was slow to come back.
However, investment in Information and Communication Technology took an ever so slight dip and then turned back northward at a slightly higher rate than it was moving before the recession.
Thus the recovery in business investment is the fact that tech has been blowing it out of the water and everything else is just now starting to come back online.
Well everything else has a ways to go before it returns to trend and everything else usually lags construction. Thus, if anything you would expect an uptick in construction to drag up non-tech business investment at an even faster rate.
Now Information and Communication Tech could slowdown but its not clear why that would be the case. Its not really clear what’s going on in that space aside from the possibility of
(A) Measurement error. This is a real issue here.
(B) Paradigm shift.
Indeed, assuming the measurements are right, it looks like a paradigm shift began in the 1990s stalled out for a bit in the early 2000s, started to kick back in gear in the late 2000s and hasn’t stopped since.
Sorry I didn’t produce charts on all of this but the detailed data comes from the BEA and they make it a bit of a pain to get the charts out.