ECONOMIC REPORT OF THE PRESIDENT

a half, consistent with the observation that, even as the financial sector
has healed, business investment growth has actually slowed further.
Another possibility is that declining profits have held back investments
in the last two years. Real corporate profits rebounded after the
recession but have been declining since 2014, leaving fewer funds for
internal funding of investment projects. But this theory also does not
match the data. Firms still have a high level of profits relative to history,
and have been taking the profits they do have and increasing payouts
to shareholders instead of investing in structures or equipment. This
suggests firms could invest if they wanted to, but do not see adequately
attractive uses of investment funds.
While evidence shows that weak global growth explains weak
business investment growth, this does not suggest that it is the only
explanation. Investment, like any other macroeconomic variable, is
affected by both short- and long-run trends. There is evidence to suggest
that the recent slowdown is also connected to a longer-run downward
trend in investment as a share of GDP over the last few decades. Part of
this decline can be attributed to secular shifts in the U.S. economy. U.S.
output is increasingly produced by services industries that require less
capital. For example, from 2010 to 2015, average investment-to-output
ratio for services industries was 15.6 percent, while it was 21.9 percent
for all non-service industries.
The accelerator model predicts a rebound in investment in the
future. A key feature of the model is that investment depends on changes
in GDP growth (in other words, the acceleration of GDP). The deceleration
in GDP, both in the United States and abroad, has already had its
negative impact on investment growth. Moving forward, more normal
investment growth should occur if—as expected—world output growth
stabilizes. Further, a rebound in global growth should also contribute to
a rebound in overall U.S. GDP growth.
growth seems to be stabilizing, real export growth rates have begun to rise
as well.
At the same time, real U.S. imports increased just 0.6 percent in the
four quarters ended 2016:Q3, slower than did exports. Taken together,
Figure 2-27 shows net exports contributed 0.4 percentage point to real GDP
growth during the first three quarters of 2016, after subtracting 0.7 percentage
point from overall growth during the four quarters of 2015.
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