Real Private Nonresidential Fixed Investment


Comparing business investment before and after the pandemic.

The Bureau of Economic Analysis, a division of the United States Department of Commerce produces data regarding investment. In this context, “fixed investment” means spending to buy things that will be used to create future goods and services. It is an important part of an economy.

I’ve gathered data from BEA on Real Private Nonresidential Fixed Investment (PFI). “Real” means the values are adjusted for changes in the value of money caused by inflation. This adjustment allows dollar values to be compared over time. BEA publishes this data quarterly.

I was interested in how the Covid pandemic affected business investment, so I created two time periods. One ends with the last quarter before the pandemic. The second period starts when PFI returned to the pre-pandemic level (or a level very close). My goal was to compensate for the economic distortions caused by the pandemic.

Table 1 shows data in a table, while chart 1 shows the data graphically.

For private fixed investment in general, BEA says:

Private fixed investment (PFI) measures spending by private businesses, nonprofit institutions, and households on fixed assets in the U.S. economy. Fixed assets consist of structures, equipment, and intellectual property products that are used in the production of goods and services. PFI encompasses the creation of new productive assets, the improvement of existing assets, and the replacement of worn out or obsolete assets.

The PFI estimates serve as an indicator of the willingness of private businesses and nonprofit institutions to expand their production capacity and as an indicator of the demand for housing. Thus, movements in PFI serve as a barometer of confidence in, and support for, future economic growth.

These definitions include residential investment as well as business investment. The figures in this chart and table include only business investment.

BEA adds this:

PFI is a measure of the additions to, and replacements of, the U.S. stock of private fixed assets. … fixed assets are produced assets that are used repeatedly or continuously in the production process — that is, in the production of other goods (including other fixed assets) or of services—for more than 1 year.

The bulk of PFI consists of capital expenditures by private business — including expenditures on new structures, equipment, and intellectual property products; net transactions in used assets; and own-account production (production by a business for its own use) of structures, equipment, and intellectual property products. PFI also includes capital expenditures by nonprofit institutions serving households, and it includes capital expenditures for the acquisition of new residential structures and for improvements to existing residential structures by households in their capacity as owner-occupants.


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