August 2018 GDP Nevil Speer

Digging deeper into business investment trends

A rising GDP is good for the U.S. economy and for beef producers. Here’s why.

By now you’ve heard the news: second quarter GDP (Gross Domestic Product) surpassed 4%.  And since that data has been released there’s been lots of discussion within the media about what it all means. Most importantly, there are enduring questions about the sustainability of that type of growth going forward. 

None of that is surprising. The media likes to focus on the headline GDP number. But digging underneath the headlines is often the more important discussion.

That’s precisely the intention of this week’s illustration. The graph highlights the relative contribution to GDP resulting from private, fixed investment (non-residential) in the U.S. economy. We last looked at this about six months ago: Business Contribution to GDP On The Upswing.

The trend is important to beef producers. In the six quarters leading up to the election, the average was only .09%. However, in the six quarters since the election, the average is running 0.95% - or better than ten-fold faster. That’s an important driver for the economy; businesses are reinvesting in the U.S. economy. 

Seemingly, business decision-makers are being purposeful about investing back into their companies. That’s a positive sign for the economy. And ultimately, that should also benefit consumer behavior through jobs and wages – not the least of which impacts beef demand.    

Nevil Speer

This all has potential implications for rural America. These same trends are likely reflected back at the farm/ranch – although we don’t get a snapshot of those numbers specifically. 

How does this trend reflect your business? What indications do you see in terms of confidence of the future direction of the U.S. economy? How do you see it playing out for beef demand? Leave your thoughts in the comments section below.

Nevil Speer serves as an industry consultant and is based in Bowling Green, KY. Contact him at [email protected]

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