FACT CHECK: Has Business Investment Grown 7.3 Percent Under Trump?

Emily Larsen | Fact Check Reporter

Republican Sen. Ron Johnson said on ABC’s “This Week” Sunday that business investment has increased 7.3 percent under President Donald Trump, while it only grew by 0.6 percent during the last two years of President Barack Obama’s tenure.

Verdict: True

Johnson’s figure was based on a preliminary report. An updated estimate means that business investment under Trump is slightly better than he claimed – 7.5 percent on average since the start of 2017.

Business investment grew an average 0.6 percent during 2015 and 2016; it grew at a faster pace in other years of the Obama presidency.

Fact Check:

Johnson mentioned the business investment figure as an example of what has been accomplished under the Trump administration.

“In just the first six quarters of this administration, business investment has increased 7.3 percent on average. The last two years under Obama, it only increased 0.6 percent,” Johnson said. “It’s that business investment that will, I think, lay the foundation for strong, economic progress, more – more prosperity, better opportunities for every American.”

The Bureau of Economic Analysis (BEA) includes figures on investment in its quarterly report on gross domestic product (GDP). The technical term for the figure that Johnson mentioned is real private nonresidential fixed investment, but many reports simply call it business investment.

The figure measures spending by businesses and nonprofit institutions on assets that improve the organization such as tools, real estate or intangible products like intellectual property. It calculates averages using 2012 dollars in order to adjust for inflation.

The Treasury Department made a similar claim using the technical term in a July press release. “Since the start of 2017, real private nonresidential fixed investment has grown at a quarterly average of 7.3 percent, marking a return to the healthy pace seen in the early years of the recovery,” it said.

To calculate the figure, Johnson and the Treasury took the average of business investment growth in the six quarters under Trump from 2017 to 2018 and the eight quarters under Obama in 2015 and 2016.

Updated estimates mean that average growth under Trump was a little better than what Johnson and the Treasury said. They found an average of 7.3 percent business investment growth under Trump because they used the BEA’s advance estimate for the second quarter of 2018, but the new estimate bumped Trump’s six-quarter growth average to 7.5 percent.

Business investment growth under Trump started at 9.6 percent in the first quarter of 2017, dipped to 3.4 percent in the third quarter of 2017 and peaked at 11.5 percent in the first quarter of 2018.

During the last two years of the Obama administration, business investment growth was lackluster, averaging 0.6 percent. The percent change was negative in three of the eight quarters and peaked at 4.6 percent.

While business investment growth slowed in the last years of Obama’s tenure, it grew at a faster pace in previous years. Following the Great Recession, business investment growth averaged 9.6 percent from 2010 to 2011, and it averaged 5.6 percent from 2012 to 2013.

GDP growth reached 4.2 percent in the second quarter of 2018, the highest rate since the third quarter of 2014. Business investment helped fuel the growth in total GDP along with government spending and exports, the BEA said.

“This investment surge has come in productive areas like equipment and commercial construction. It has not come from padding inventories that have to be sold down, or in a housing mania like the one that drove growth in the mid-2000s,” The Wall Street Journal editorial board wrote in July following the 2018 second quarter advance report.

Johnson linked the growth in business investment to Trump’s policies like the tax cuts passed in December 2017. “We stopped adding to the regulatory burden. We have a more competitive tax system,” he said on “This Week.”

While some reports say that business investment is growing robustly, others say that the growth under Trump is not particularly remarkable.

“The capital spending recovery over the past few quarters, while solid, hasn’t exactly been setting any records,” Bloomberg Opinion columnist Justin Fox wrote in July.

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Emily Larsen

Fact Check Reporter

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