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Real GDP driven by domestic investments and exports in foreign trade

U. S. Exports increase Real GDP
U. S. Exports increase Real GDP
Photo by Joe Raedle/Getty Images

Real gross domestic product (the output of goods and services produced by labor and property located in the United States) increased at an annual rate of 4.0 percent in the second quarter of 2014 according to the advanced estimate release by the Bureau of Economic Analysis.

The highest indicator showing an increase to 17.0 percent from -6.9 percent in the first quarter of 2014 for real GDP involved the gross private domestic investment category that involves private fixed investment and change in private inventories which includes replacements and additions to capital stock. Durable goods (within the personal consumption expenditures sector) showed an increase to 14.0 percent from 3.2 percent in the first quarter.

Private fixed investments serve as an indicator of expenditures by private businesses and nonprofit institutions to increase their production capacity for the demand in new nonresidential and residential buildings. Fixed assets consist of new residential and nonresidential structures, equipment such as plumbing and heating systems and elevators, petroleum and natural gas well drilling and exploration, software used in the production of goods and services and in the improvement of existing or worn out and obsolete assets such as new technology according to the National Income and Product account (NIPA) handbook. According to NIPA, the construction of a new house is treated as an investment.

Durable goods are tangible commodities that can be stored or inventoried and have an average life of at least three years held by households and by nonprofit institutions serving households establishment such as. U. S. residents traveling, working and attending school in foreign countries.

The August 6 report released from the U. S. Census Bureau’s Foreign Trade Division indicates a trade deficit decrease for the second month in a row from $3.1 billion to $41.6 billion. The report also states the decrease was driven in part by an increase of exports and a decrease of imports. The report highlights a record high in exports of Total Services and in Other Business Services and Travel (for all purposes). Exports of automotive ($13.7 billion) and Consumer Goods ($17.2 billion) increased to high levels while their respective imports decreased by $1.1 billion and $1.3 billion respectively.

According to the U. S. Dept of Commerce, nearly one-third of the country’s economic growth since mid-2009 has been driven by exports. The number of jobs supported by exports has grown to more than 11.3 million – the highest in 20 years.

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