by Calculated Risk on 7/28/2017 11:12:00 AM

First, the BEA released revisions of GDP data from 2014 through Q1 2017.  In general, GDP was revised up slightly, although residential investment was revised down a little.  Not a significant change.

The first graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Click on graph for larger image.

Residential investment (RI) decreased at a 6.8% annual rate in Q1.  Equipment investment increased at a 8.2% annual rate, and investment in non-residential structures increased at a 4.9% annual rate.

On a 3 quarter trailing average basis, RI (red), equipment (green), and nonresidential structures (blue) are all positive.

I'll post more on the components of non-residential investment once the supplemental data is released.

I expect investment to be solid going forward, and for the economy to continue to grow.

The second graph shows residential investment as a percent of GDP.

Residential Investment as a percent of GDP decreased in Q2, but has generally been increasing.  RI as a percent of GDP is only just above the bottom of the previous recessions - and I expect RI to continue to increase for the next few years.

I'll break down Residential Investment into components after the GDP details are released.

Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

The third graph shows non-residential investment in structures, equipment and "intellectual property products".  Investment in equipment - as a percent of GDP - picked up.  Investment in nonresidential structures - as a percent of GDP - had been moving down due to less investment in energy and power, and is now picking up again.

Still no worries.