Investment instability—Changes in real private nonresidential fixed investment T

Question

Investment instability—Changes in real private nonresidential fixed investment The Bureau of Economic Analysis provides data for real private nonresidential fixed investment in table form at www.bea.gov. Access the BEA interactively by first clicking on "National," then "Interactive Tables: GDP and the National Income and Product Accounts Tables," and then "Choose a table from a list of All NIPA Tables." Scroll down until you find Table 5.3.5, "Nonresidential." Has recent real private nonresidential fixed investment been volatile (as measured by percentage change from previous quarters)? Which is the largest component of this type of investment, (a) structures or (b) equipment and software? Which of these two components has been more volatile? How do recent quarterly percentage changes compare with the previous years' changes? Looking at the investment data, what investment forecast would you make for the upcoming year?

Explanation / Answer

The real private nonresidential fixed investment for the four quarters of 2015 was $2,280.7 billion, $2,297.9 billion, $2,319.4 billion and $2,309.5 billion. Clearly there is no volatility as the figures are more or less hover around $2300 billion.

The largest component of this type of investment out of structures ($497 billion), equipment ($1076 billion) and software ($327 billion), is equipment which is worth $1076 billion.

Looking at the figures of Structures (499.3 503.8 496.0 489.5) equipments (1,063.5 1,064.6 1,090.9 1,085.3) and software (324.1 326.7 328.3 329.8), there is a volatility in software as there is a continuous increase in this investment.

Accordingly, there must be an estimated escalation in the demand for software more than any other investment.

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