Nonresidential fixed investment rises in 2nd quarter

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While the nation’s economy is still showing signs of weakness, nonresidential fixed investment increased 6.3 percent in the second quarter of this year following a revised 2.1 percent increase in the first quarter, according to the July 29 Gross Domestic Product (GDP) report by the U.S. Commerce Department.

The Associated Builders and Contractor’s Chief Economist Anirban Basu reports nonresidential fixed investment in structures jumped 8.1 percent in the second quarter following a 14.3 percent drop in the previous quarter. Fixed investment in equipment and software rose 5.7 percent in the second quarter following an 8.7 percent gain in the first quarter.

“Despite the fact that the headlines for today’s GDP report seem awful, there is actually a significant amount of decent news buried in the data,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Much of the slowdown in economic growth is due to a deceleration in consumer spending, but other aspects of the economy, including exports, investment in structures and investment in equipment and software expanded robustly during the second quarter.

“Consumption slowed largely because of higher food and energy prices. The question was whether businesses would follow the path laid down by consumers or continue to remain in expansion mode. The answer is that businesses continued to position themselves for growth opportunities,” Basu said.

“Sadly, corporate momentum and confidence may not last,” said Basu. “Given the ongoing shakiness among consumers in light of high and rising unemployment, and lingering uncertainty in Washington, inventory investment is unlikely to pick up significantly in the near-term. That will lead to weakness in orders and production. Read More.

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