1fAWAwx

Percent
25
20
15
10
5
0
-5
Figure 2-9
Business Investment and the Acceleration of
Business Output, 1965–2013
4-quarter change in business fixed
investment (left axis)
Percentage points
25
2013:Q4
20
15
10
5
0
-5
-10
-15
Acceleration of business output
(right axis)
-10
-15
-20
-20
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Note: The accelerator is the 6-quarter percent change in business output (AR) less the 6-quarter ago 6-
quarter percent change in business output (AR). Shading denotes recession.
Source: Bureau of Economic Analysis, National Income and Product Accounts.
positive in 2010), investment increased very fast so that the capital stock
could service the new level of demand. But when business output growth
settled down to an annual rate of roughly 3 percent during the three years
through 2013, investment did not need to grow so fast, and indeed it has
slowed, as shown in Figure 2-9.
Inventory Investment. Inventory investment made a substantial
contribution to real GDP growth during the four quarters of 2013 when
it accounted for 0.8 percentage point of the 2.5 percent total growth. An
increase in agricultural inventory investment accounts for 0.3 percentage
point of that overall 0.8 percentage-point contribution and reflects the
rebound to a strong harvest following a severe drought in 2012. In the
manufacturing and trade sector, the buildup of inventories through the year
was no faster than sales, so that by December, inventory stocks were at a 1.30
months’ supply, roughly the same level as at year-end 2012.
State and Local Governments
Although State and local governments continued to experience fiscal
pressure in 2013, the four-year contraction in the sector—measured in terms
of both purchases (consumption and investment) and employment—finally
appears to have ended. State and local purchases, which had generally
62 | Chapter 2