On Wednesday, July 27th, the U.S. Census Bureau will issue the advance report on durable goods for June. This release is important because it impacts Gross Domestic Product (GDP) in two significant ways: exports of goods and business investment in equipment and software. (The first look at GDP for the second quarter will be released on July 29th by the Bureau of Economic Analysis.)
After a steep decline in business investment in equipment and software over the course of the recession, the rebound during the current recovery has been about 10 percent above the average rebound of other recent recoveries (depicted by the red line above the blue line). In fact, the current rebound in business investment in equipment and software has been the second largest of the past six recoveries (discounting the brief upturn following the 1980 recession). Growth has been driven largely by transportation equipment, which rebounded much more vigorously than usual after a larger-than-usual decline, and by investment in industrial equipment, which has shown considerable strength over the past four quarters. The rebound in information processing and related spending has been fairly typical. One important factor to note that has helped boost business investment is the Obama administration's Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which included provisions allowing for accelerated depreciation, making investment in machinery and equipment cheaper and more attractive.
Above-average exports have also stood out in the recovery. Goods exports, including computers, industrial supplies, materials, and non-automotive capital goods, have led the way with noteworthy gains. The pickup in exports of services, which have reached record highs of late, has been consistent with previous recoveries. Overall, since 2009, exports have been increasing at a strong pace, exceeding the average pace needed to meet the President's National Export Initiative goal of doubling exports in support of several million U.S. jobs by 2015.
~Mark Doms, Chief Economist, U.S. Department of Commerce
July 26, 2011
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