Saturday, September 22, 2012

Private Fixed Investment Signaling A Recession?

An article from three months ago on the SentimentCharts website noted the slowing YOY change in Private Fixed Investment (FPI) had signaled all seven U.S. recession over the last 45 years. The data used in the SentimentCharts' article was through the first quarter of the year and an increase in the growth of FPI was seen. One quarter later though, through the second quarter, the YOY growth in FPI is slowing.

From The Blog of HORAN Capital Advisors

Private Fixed Investment is an element that goes into the calculation of GDP. In the BEA's second release of second quarter GDP, they noted weakness in fixed investment as a cause for the deceleration of Q2 GDP.
"The deceleration in real GDP in the second quarter primarily reflected decelerations in PCE, in nonresidential fixed investment, and in residential fixed investment that were partly offset by a smaller decrease in federal government spending, an acceleration in exports, and a smaller decrease in private inventory investment."
The slowing growth in fixed investment along with a significant increase in the number of companies lowering Q3 earnings guidance are just a couple of factors that should be a cause for concern for investors.

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