Nonresidential Fixed Investment Surges Despite Sluggish Economic in First Quarter
The U.S. economy's performance slowed in the first quarter of
2017, but nonresidential fixed investment expanded at an impressive
9.4 percent seasonally adjusted annual rate, according to analysis
of U.S. Bureau of
Economic Analysis data released today by Associated Builders and
Real gross domestic product (GDP) expanded 0.7 percent on a
seasonally adjusted annualized rate during the first three months
of the year. Despite the subdued growth, GDP has now expanded in
every quarter over the past three years. Fourth quarter 2016 growth
was revised upward from a 1.9 percent annual rate of expansion to a
2.1 percent annual rate.
This represents the best quarter for nonresidential fixed
investment, a category closely aligned with construction and other
forms of business investment, since the end of 2013 and ends more
than a year of tepid nonresidential fixed investment growth.
Investment in structures, a subcomponent of nonresidential fixed
investment, expanded 22.1 percent for the quarter after contracting
by 1.9 percent in the fourth quarter of 2016. The other two
subcomponents of nonresidential fixed investment-equipment and
intellectual property products-expanded at a 9.1 percent rate and a
2.0 percent rate, respectively.
"It was expected that first quarter GDP would indicate that the
U.S. economy remained unable to generate a high rate of growth,"
said ABC Chief Economist Anirban Basu. "Many economic actors appear
to have adopted a cautious attitude in an environment characterized
by a considerable amount of policy uncertainty. The decline in
defense expenditures is likely to be a surprise to many given
recent discussions about supposed vast increases in defense
"The investment in nonresidential structures during the first
three months of the year is particularly remarkable in an
environment otherwise characterized as generating little economic
growth," said Basu. "Rather than adopt a wait-and-see attitude,
developers appear to have acted with conviction, taking advantage
of growing confidence among investors and other market participants
to forge ahead with planned projects. While the new presidential
administration has yet to implement even a small fraction of its
pro-business agenda, the development community continues to express
confidence in the administration's ability to create the conditions
necessary for a much more vibrant U.S. economy.
"The expectation is that the balance of the year will be
associated with much more rapid growth," said Basu. "Consumer
spending should pick up after a weak first quarter, given
accelerating wage increases and elevated levels of job security.
Business spending is also likely to expand briskly, particularly if
the Trump administration is able to make meaningful progress on the
corporate and personal income tax front."