Hidden Message in GDP
Often in economics breaking down a whole into its components tells a unique story. While overall GDP appears to be at or above potential, some of its components suggest continued growth.​

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  • ​When businesses and consumers are confident, they tend to make discretionary, long-term investments in things like new plants and equipment on the corporate side or new houses and remodeling projects on the consumer side.

  • These investments or cyclical components of GDP (business investment, residential investment and consumer durables) are still quite depressed even after nearly a decade of expansion. Their relatively low levels indicate potentially more investment to come.

  • These investments, which have historically climbed much higher prior to economic peaks, may drive economic growth going forward and corporate earnings as well. These components tell a more bullish story than the representation of GDP as a whole.

The views expressed are the views of Fred Alger Management, Inc. as of May 2019. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

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