A little holiday cheer ... Discussions of the business cycle frequently focus on consumer spending (PCE: Personal consumption expenditures), but the key is to watch private domestic investment, especially residential investment. Even though private investment usually only accounts for around 15% of GDP, the swings for private investment are significantly larger than for PCE during the business cycle, so private investment has an outsized impact on GDP at transitions in the business cycle. The first graph shows the real annualized change in GDP and private investment since 1960 (this is a 3 quarter centered average to ... (full story)