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Business contribution to GDP on the upswing after laying dormant for years

Businesses are beginning to make sustained investment in their operations. That’s a positive sign for the economy over the long run.

Nevil Speer

March 9, 2018

2 Min Read
Business contribution to GDP on the upswing after laying dormant for years

The media generally focuses on the headline GDP (gross domestic product) number that comes out every quarter. And as of late, the focus has been, and will continue to be, on whether we can consistently achieve 3% growth in the U.S. economy. 

However, what’s more interesting are the various contributors to GDP. Similar to last week’s Industry At A Glance, there are some interesting trends occurring underneath the headline number. And those trends have some implications with respect to rural America. 

This week’s illustration highlights the contribution to GDP made by private, fixed investment (non-residential) in the U.S. economy. That contribution has been waning during the past several years. Note that this portion of the economy peaked in the third quarter of 2014 at 1.31%.  Since that time, there’s been a steady decline. In fact, the one-year moving average hovered at or below zero during the last half of 2015 and for the entire year during 2016.  

March-2018-GDP.png

In other words, private companies were not investing in the U.S. economy. Meanwhile, fixed investment has seen a sharp uptick during the past four quarters—all of 2017. The fourth quarter of 2017 saw total GDP pegged at +2.6% -- private investment represents nearly one-third of those gains. Businesses are beginning to make sustained investment in their operations. That’s a positive sign for the economy over the long run. 

All of this has implications for rural America. These same trends are likely reflected back at the farm and ranch, although we don’t get a snapshot of those numbers specifically. How does this trend reflect your business? Have you, or are you, making plans to make fixed investment in your operation? Have you seen signs of these trends either by your neighbors or in your local area? Leave your thoughts in the comments section below.

Nevil Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited.

About the Author(s)

Nevil Speer

Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.

Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
 
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs.  He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
 
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
 
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.

Contact him at [email protected].

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