Thursday, May 7, 2015

My Wall St Journal Comment On Lower Productivity and Lower Private Business Capital Investment

My posted comment to the Wall Street Journal article, "U.S. Productivity Falls 1.9% in First Quarter: Latest sign of sluggish economic growth at the start of the year" by Jeffrey Sparshott:
Private [business] capital investment is necessary for productivity gains. [Private business capital investment excludes residential real estate investment.] Net private [business] capital investment is the amount of private [business] capital invested after subtracting out depreciation. It is the amount of incremental private [business] capital invested after paying for the replacement and replenishment of the depreciation effect on existing capital. According to the St Louis Fed and the FRED data base [see link], net private, or incremental, [business] capital investment in the 2010-14 time was 15.5 percent of total private capital investment. The average for 1960-2014 time is 30.2 percent and has been declining for each decade since 1960, when it was 40 percent.

With private companies investing half as much new capital [in their businesses] in the 2010-14 period as from 1960 on, no one should be surprised that productivity is declining, and with incremental private [business] capital investment steadily declining since 1960, no one should be surprised that the US had its best years of productivity gains decades ago.
Also, see my April 23, 2015 blog post, "Disinvestment: Declining US Business Domestic Investment In Excess Of Depreciation."

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