Business Investment Key in GDP Upward Revision

By at 28 March, 2024, 2:22 pm

by Raymond J. Keating – 

The U.S. Bureau of Economic Analysis served up its third estimate, and second revision, of fourth quarter 2023 gross domestic product (GDP) on March 28.

After an initial estimate of 3.3 percent real growth, that was revised down to 3.2 percent, and now up to 3.4 percent (seasonally adjusted, annualized rates). For the full year of 2023, real GDP growth remained at 2.5 percent.

So, what about this latest revision upward? There were two key positives.

First, consumer spending was revised upward. Real personal consumption expenditures went from 3.0 percent growth to 3.3 percent.

Second, growth in real business investment, i.e., real private fixed nonresidential investment, went from 2.4 percent to 3.7 percent. That included growth in structures investment revised from 7.5 percent to 10.9 percent; intellectual property products investment growth from 3.3 percent to 4.3 percent; and the decline in equipment investment went from -1.7 percent to -1.1 percent.

The upward revision on the business investment front is the standout point in this revised report.

However, trade was revised down. Real export growth in the fourth quarter was revised from 6.4 percent to 5.1 percent (still strong), and real import growth down from 2.7 percent to 2.2 percent.

The bottom line is that the second half of 2023 experienced solid growth – i.e., 4.9 percent real GDP growth in the third quarter and 3.4 percent in the fourth – which was a notable improvement upon the first half of the year – i.e., 2.2 percent in the first quarter and 2.1 percent in the second. Also, second half growth seemed to surprise many in the market. Let’s hope that expectations for a slowdown, or even recession in 2024, also turn out to be off base, and that solid growth continues.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.



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