According to the NYT, Federal Reserve Board Chairman Ben Bernanke told the Joint Economic Committee yesterday that he �expects business investment and consumer spending to continue to grow.� This statement is a bit disconcerting, because investment is not growing. The Commerce Department reported that non-residential investment fell at a 2.4 percent annual rate in the 4th quarter. The data for the first two months of the current quarter imply that equipment investment is still falling. The data for January indicate that Investment in the much smaller non-residential construction sector may be rising very modestly, but certainly not enough to offset the decline reported in equipment investment. (This data is all nominal, but the conclusion that real investment is falling holds unless prices are moving very differently than they did in the 4th quarter.) Anyhow, the data seem to show that investment has been declining since the end of the third quarter. So, it's not clear what Mr. Bernanke means when he says that investment will continue to rise.
--Dean Baker
