– January 15, 2016

In five of the past six quarters, consumer spending in the U.S. contributed at least 2 percentage points of the 2.9 percent average growth in real gross domestic product, or GDP, the main measure of economic output. At the same time, business investment contributed just 0.26 percentage point, including back-to-back declines in the fourth quarter of 2014 and first quarter of 2015. Many factors have contributed to the scant growth in business investment, but among the most important has been weak commodity prices, particularly in energy and agricultural products. We have noted the influence of a strong dollar on commodity prices and the secondary effects on consumers, employment, and inflation. This month we look at the impact on capital investment.

The dramatic plunge in energy prices, particularly crude oil, over the past 18 months has sharply depressed capital spending in mining industries. Investments in structures and machinery in mining and oil-field development have fallen by almost half since both peaked in 2014.


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Next/Previous Section:
1.Overview

2. Economy

3. Inflation

4. Policy

5. Investing

6. Pulling It All Together/Appendix

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AIER Staff

Founded in 1933, The American Institute for Economic Research (AIER) educates people on the value of personal freedom, free enterprise, property rights, limited government, and sound money. AIER’s ongoing scientific research demonstrates the importance of these principles in advancing peace, prosperity, and human progress.

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