What is the indicator status of the Private Nonresidential Fixed Investment? Explain
Nonresidential fixed investment consists of all the purchase of nonresidential structures and equipment and software. Nonresidential structures consists of new construction, improvements to existing structures, broker’s commission on sale of structures, expenditure on new mobile structures and net acquisition of structures by private enterprises and by nonprofit institutions from government state and federal government agencies. Investment in factories, computer software, and machines, all increase the capital available for production of goods and services that workers can supply to the economy.
The housing market has experienced a modest growth following the economic recovery and increase in capital investment. According to a report by the Commerce Department on gross domestic product (GDP), the private nonresidential fixed investment grew by 2.1 percent in the first quarter of the year. Private nonresidential investment crashed during the recession, but it recovered sharply through 2011. Non-residential investment saw an average growth of 8.6 percent between 2010 and 2012. The pace of growth has however fallen to only 4.3 percent. The growth of private nonresidential fixed investment declined because the economic recovery, to date, has not been able to support and sustain recovery of the sector.
Hopefully, low interest rates in mortgage, reduction in fiscal uncertainty, and improvements in household income and credit will lead to a turnaround in private nonresidential fixed investment. The private nonresidential fixed investment is poised to grow in the future with the increase in capital spending. This will support the GDP growth and other sectors in the economy including proving employment. In conclusion, private nonresidential fixed investment will experience a modest growth in the future as the economy recovers and investors increase their capital spending.
