JPMorgan's Feroli: Business Investment May Be Understated

Wednesday, 04 Sep 2013 04:20 PM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

Business investment in the U.S. was probably stronger last quarter than government data indicate, according to Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York.

The 2.9 percent gain in spending on equipment at an annualized rate last quarter may actually have been closer to 8 percent, Feroli said in a research report Wednesday. Such an increase would have added an additional 0.25 percentage point to the 2.5 percent advance in gross domestic product the Commerce Department reported for the period from April through June.

“We believe that actual business equipment spending isn’t as soft as the official number,” Feroli wrote.

Feroli came to that conclusion after looking at data on machinery sales and inventories by wholesalers. The money spent on new machines accounts for about 33 percent of total equipment investments, he said.

Wholesale machinery sales jumped at a 24 percent annualized rate in the second quarter and inventories dropped at an almost $11 billion pace, according to Feroli’s calculations. The jump in demand and drawdown in stockpiles indicate a much larger gain in spending on this category than the government’s data show, he said.

The Bureau of Economic Analysis, the group within the Commerce Department charged with calculating economic growth, doesn’t take into account changes in inventories when compiling its estimate for business investment, Feroli said.

“BEA is continually looking to improve its estimation methodologies,” said Nicole Mayerhauser, chief of BEA’s national income and wealth division, said in an e-mail.

© Copyright 2014 Bloomberg News. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
Privacy: We never share your email.
 

You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved