Deputy Assistant Secretary Tara Sinclair and Assistant Secretary Van Nostrand and Special Assistant Gupta discuss The construction of the manufacturing industry continued to prosper. Here is a graph:
source: Van Nostrand, Sinclair, Gupta (2023).
One would not see such a move for non-macro policies. I wonder what this means in the context of private non-residential fixed investment as a whole. Here is the picture. Instead of construction data, I used BEA fixed investment data (which is much less than Q1 2023 construction data – see appendix for comparative figures).
figure 1: Nonresidential fixed investment (black thick line), Q2 GDPNow (red squares), nonresidential fixed investment in manufacturing structure (blue bars), fixed investment in nonmanufacturing structure (brown bars), and rest of nonresidential Fixed investment (green bars), all in billions. 2012 SAAR. Sources: BEA, Atlanta Fed, and authors’ calculations.
Looking ahead, as of today, the Atlanta Fed’s GDPNow showed the following for Q2 GDP and nonresidential fixed investment.
figure 2: GDP (black, left log scale), Q2 GDPNow (red squares, left log scale) and nonresidential fixed investment (blue, right log scale), GDPNow implied nonresidential fixed investment (light blue squares, right log scale), all in 2012 $1 billion SAAR. Recession peak-to-trough dates as defined by NBER are grayed out. Sources: BEA, Atlanta Fed, NBER, and authors’ calculations.
Even as GDP slows, investment continues to grow relatively quickly, so the log ratio of investment to GDP continues to rise. GDPNow means this will continue into the second quarter. During the Great Moderation, the investment-to-GDP ratio peaks before the NBER peak (with the exception of the Great Recession). This suggests that it will be some time before a recession hits.
appendix:
This is the nominal version of the series used in Treasury documents, as well as the BEA series for structured investments.
image 3: Manufacturing construction (blue) and investment in nonresidential manufacturing structures (black), in billions of dollars, SAAR. 2023Q2 observations are the average of April and May data. Recession peak-to-trough dates as defined by NBER are grayed out. Sources: Census, Bureau of Economic Analysis, and authors’ calculations.
