In the second quarter of 2020, real investment in the United States dramatically declined according to data published by the Bureau of Economic Analysis (-29.9 percent annualized). Interestingly, there are quite large differences across the various types of investment. Unsurprisingly, very large decreased are observed for transportation equipment (-85.7 percent annualized). The large drop in fuel prices also led to a large reduction of investment in petroleum exploration. Residential investment decreased by a large 38.7 percent. Investment in manufacturing structures and industrial equipment saw lower, but still dramatic decreases of 25.3 and 22.5 percent, respectively. For intangible investments in software and research and development, relatively mild decreases of 1.4 and 8.9 percent are reported. There is even a category where investment increased. And guess what: it was computers! Home office lead to an increase in investment in computers and related equipment of a stunning 67.7 percent.
It will be interesting to observe how fast investment recovers. My forecast is that investment will remain subdued in the third and fourth quarter of this year. But obviously, there is a lot of uncertainty around the economy.
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