by Calculated Risk on 1/30/2009 09:09:00 AM
Friday, January 30, 2009
Here are a couple of graphs on the investment slump. Residential real residential fixed investment decreased at an a 23.6% annualized rate in Q4.
Click on graph for larger image in new window.
This graph shows residential investment (RI) as a percent of GDP since 1947. Residential investment has fallen to 3.07% of GDP. This is the lowest residential investment, as a percent of GDP, since WW II.
I'll post more on the components of RI in a few days when the supplemental data is released.
The second graph shows non-residential investment as a percent of GDP.
Investment in software and equipment declined at a 27.8% annualized rate in Q4. Cliff diving! This investment is at the lowest rate since the '70s.
However investment in non-residential structures only declined at a 1.8% annualized rate. As a percent of GDP, non-residential structure investment actually increased slightly in Q4. This story will change in 2009, and non-residential structure investment will be a significant drag on GDP.
I'll have much more on non-residential structures in a few days ...
This investment slump is a huge part of the recession story. Residential led the economy into recession (as is typical) and now non-residential investment is falling off a cliff - or, as in the case of non-residential structures, will fall off a cliff in 2009.