GDP Revised Up Slightly Thanks to Business Investment

By SBE Council at 29 August, 2018, 10:21 am

Small Business Insider

by Raymond J. Keating-

The U.S. Bureau of Economic Analysis released its second estimate of second quarter GDP on August 29^th. The topline revision of real GDP growth was minor, but in a positive direction, with the second quarter growth rate estimate moving from 4.1 percent to 4.2 percent.

That’s the fastest growth since the third quarter of 2014.

Stronger Business Investment

The key component of this upward revision is worth noting. While growth in personal consumption expenditures moved down from an original estimate of 4.0 percent real growth to 3.8 percent, growth in private real nonresidential fixed investment (i.e., business investment) was revised up from 7.3 percent to 8.5 percent in the second quarter.

Growth in equipment investment went from an original estimate of 3.9 percent to 4.4 percent, and investment in intellectual property products moved from 8.2 percent to 11.0 percent.

More robust investment, of course, fuels economic growth now and in the future – boosting innovation, productivity, and income growth.

Trade Concerns

The only note of real concern in the revisions came on the trade front. Strong export growth was revised down slightly (from 9.3 percent to 9.1 percent) for the second quarter, while a tiny move up in imports (+0.5 percent) in the first estimate of second quarter GDP was revised down to -0.4 percent. There’s nothing positive about imports declining. To the extent that it signals rising costs for consumers and small businesses due to higher tariffs, it’s another tangible consequence of restrictive trade policies that will only serve to undermine the overall positive direction of the economy. Indeed, looking at future GDP growth, trade serves as the biggest concern and uncertainty.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.