The great American investment boom
This is a sign of an economy that is prioritising the future over the present
National income and product accounts (NIPA) can appear boring. But, like all forms of accounting, they can sometimes provide useful insights.
In NIPA, a country’s production (GDP) and imports can go towards private consumption, government consumption, private investment or exports. Imagine that a country either produces or imports a pile of potatoes: each potato can be eaten by a citizen (private consumption), eaten by the government (government consumption), planted in the ground to make potatoes in the future (private investment) or sent to a foreign country (exports).
What might be less obvious is that two of these uses — private investment and exports — build a better future for citizens and their children, while the other two — private consumption and government consumption — do not.
Investment — the building of factories, office buildings and houses, along with the installation of equipment — is the real, physical manifestation of an economy prioritising the future over the present. Physical investment produces goods and services in the future but not today. Likewise, when a country exports more than it imports, its residents therefore must be engaged in net foreign direct investment or purchasing financial instruments such as currency, bonds, stocks or land deeds from the rest of the world. That is, the country is saving for its future. When a country imports more than it exports (as the US has been for decades), its residents must either be spending the proceeds of their net foreign direct investment or selling financial instruments to the rest of the world to pay for the net imports, implying the country is either borrowing or dissaving.
Given this framework, where is the US now?
First, consider the two uses of GDP that don’t go towards a nation’s future. Private consumption is growing at an annualised inflation-adjusted rate of 2.2 per cent in the first half of 2026, while GDP grew at just under 2.4 per cent. That is, our country’s rate of production is outpacing private consumption.
While real GDP is growing, federal government consumption is falling and total government consumption is hardly growing at all. Real federal government consumption expenditures are down 2.3 per cent year-on-year and are down 3.9 per cent cumulatively since the fourth quarter of 2024. Total government consumption expenditures (including state and local government) are essentially flat.
Now consider the two uses of GDP that do go towards the future: investment and trade.
Under President Donald Trump, investment is outpacing production. In the first half of 2026, inflation-adjusted non-residential fixed investment is growing at an annual rate of 6.9 per cent, compared to 3.8 per cent in 2025, and just 2.3 per cent in 2024. American publicly traded companies are on track to nearly double their capital expenditures between 2024 ($1.4tn) and 2026 ($2.4tn). In the first half of 2026, inflation-adjusted overall investment is up at an annualised rate of 5.9 per cent.
Finally, both exports and imports point towards the re-industrialisation of the American economy. Real exports of goods are up 8.2 per cent year-on-year in Q2, while real exports of goods and services are up 5.8 per cent. Exports of capital goods (except automotive) are up 12.6 per cent. American capital goods exports in every single quarter since Trump took office have exceeded even the best quarter of the Joe Biden administration.
America’s imports also point towards re-industrialisation. Rather than importing a large share of consumer products, we are importing capital goods at record levels. These goods, such as computers and industrial machinery, are fuel for future American manufacturing. Imports of capital goods are at a record high, both in dollar value and as a share of goods imports. Relative to this point in 2025, imports of capital goods (except automotive) are up 39 per cent. At the same time, imports of consumer goods are down to their lowest share of total goods imports on record.
To be sure, America is still importing more than it is exporting or earning from its net foreign direct investments, and this difference is akin to our nation dissaving by selling assets or borrowing from foreigners. But it’s one thing to borrow to finance private or government consumption and another to borrow to finance investment. Today the US is investing to build a brighter future for ourselves and, in the words of the constitution, our posterity.