U.S. Small Firms’ Investment at 16-Year High as Share of GDP


Blame Corporate America for a reluctance to invest. Small businesses aren’t holding back.

Capital expenditures by non-financial, non-corporate U.S. businesses -- typically smaller firms -- rose to 2.35 percent of gross domestic product in the third quarter, the most since 1989, according to data published Thursday by the Federal Reserve. Meanwhile, larger companies are only investing to the tune of 9.15 percent of GDP -- well below levels that prevailed in the previous two expansions, and even earlier in this expansion.

The step-up in investment may indicate that small businesses are responding to mounting labor costs, which may foreshadow a long-awaited pickup in productivity growth, said Carl Riccadonna, chief U.S. economist at Bloomberg Intelligence.

(Corrects headline, second paragraph and chart to reflect calculations using appropriate seasonal adjustments.)
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