As James Hamilton notes in that Econbrowser article, that sizable drop in “non-residential fixed investment” is largely the result of the oil bust, which has led to significant cutbacks in that sector in the last year.
Domestic spending on mining exploration, shafts, and wells is now down more than $100 billion at an annual rate (about 6/10 of a percent of total U.S. GDP) from the levels seen in the summer of 2014.With oil and gas prices now rising, we’ll see if this decline gets slowed and/or reverses in the coming months. But note that even with gas prices plunging, and inflation being nearly non-existent as a result, consumer spending still didn’t pick up at the start of this year. Growth in that sector declined from 2.4% at the end of 2015 to 1.9% in Q1 2016. Even worse, consumer spending on durable goods declined for the first time in nearly 5 years, with a notable drop in “motor vehicle and parts” sales.
I frankly don’t find a whole lot to be cheery about other than the fact that the 1st Quarter of the year has been a laggard in the 2010s, with growth declining in the first three months of 2011 and 2014, and only going up by 0.6% in 2015. But each of those years were beset with worse weather, and flat to declining Government spending. Not the case in 2016, and the fact that consumer spending growth declined while real disposable income went up by nearly 3% indicates that Americans weren’t saving up instead of buying into better times.
Obviously, these GDP numbers could be revised in the next 2 months, and the consistent gains in the non-oil and manufacturing sides of the job market continued unabated in Q1 2016. So I don’t see a recession looming as of this time. At the same time it may also explain why so many are feeling economic anxiety these days, as nothing seems too stable, and while real wages are finally increasing, a lot of that is a reflection of the lower gas prices lowering inflation instead of people getting sizable wage increases.
Now we're onto Q2, and the first major reports on the economy for that period start to drop this week, including the jobs report on Friday. If the job growth starts slowing down from the 200,000-a-month level we've been on, then the “meh” feeling that I currently have about the economy might turn more into “Uh oh.” But not until then.