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Investment rates
The share of total GDP that is devoted to investment in fixed assets is an important indicator of future economic growth, although not all types of investment contribute to future growth in the same way. The following tables show the total of gross fixed capital formation (investment or GFCF) as a share of GDP and two of the main components – dwellings and machinery and equipment.
Definition
Gross fixed capital formation (GFCF) is the acquisition, less disposal, of fixed assets, i.e. products which are expected to be used in production for several years. Acquisitions include both purchases of assets (new or second-hand) and the construction of assets by producers for their own use. Disposals include sales of assets for scrap as well as sales of used assets in a working condition to other producers: New Zealand, Mexico and some Central European countries import substantial quantities of used assets.
Fixed assets consist of machinery and equipment; dwellings and other buildings; roads, bridges, airfields and dams; orchards and tree plantations; improvements to land such as fencing, leveling and draining; draught animals and other animals that are kept for the milk and wool that they produce; computer software and databases; entertainment, literary or artistic originals; and expenditures on mineral exploration. What all these things have in common is that they contribute to future production. This may not be obvious in the case of dwellings but, in the national accounts, flats and houses are considered to produce housing services which are consumed by owners or tenants over the life of the building.
In calculating the shares, gross fixed capital formation and GDP are both valued at current market prices.
Comparability
When the System of National Accounts was revised in 1993, the scope of GFCF was widened to include mineral exploration, computer software and entertainment, literary and artistic originals. In several countries these three items are only partially covered. In the case of Turkey, which still adheres to the 1968 version of the SNA, they are not included at all
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Long-term trends The total investment rate now averages just over 21% for the OECD as a whole but rates are substantially higher than this in Korea, Spain, the Czech Republic and Australia and well below 20% in the United Kingdom, Sweden, Germany and Turkey. For the OECD as a whole, total investment rates are largely unchanged compared to 1992-1994. Particularly sharp falls occurred in Turkey, Germany and Japan, although in Japan, investment rates remain well above the OECD average. Total investment rates are now much higher than at the beginning of the 1990s in Ireland, Iceland and Spain. Investment in machinery and equipment accounts for more than 30% of GFCF in most OECD countries, but investment rates tend to be higher than this in countries with a significant manufacturing base, such as Japan, Korea, Switzerland and the Czech Republic. Over the period shown, the machinery investment rates have fallen in most countries, with particularly sharp falls in Luxembourg, Korea, Netherlands and Poland, reflecting higher growth of service activities. Rates grew most in Greece and Iceland. Investment rates in dwellings were particularly high at both the beginning and the end of the period in Norway and Portugal. Ireland, the Slovak Republic and Spain recorded substantial increases over the period, but a number of countries recorded large falls: Turkey, Luxembourg, Sweden, Japan and Korea. In the short term, rates of investment in dwellings are sensitive to the business cycle, but, over the long run, investment rates in dwellings reflect population growth rates either through natural growth or immigration, and rising affluence, as is evident for Ireland and Norway. |
Sources
- OECD (2006), National Accounts of OECD Countries, OECD, Paris.
- For Brazil, Russian Federation and South Africa: OECD (2006), Main Economic Indicators, OECD, Paris.
- For China: National Bureau of Statistics.
Further information
Analytical publications
- OECD (2007), OECD Economic Outlook: December No. 80 – Volume 2006 Issue 2, OECD, Paris.
Methodological publications
- Ahmad, N. (2004), "Towards More Harmonised Estimates of Investment in Software”, OECD Economic Studies, No. 37, 2003/2, OECD, Paris.
- OECD (2000), OECD Glossaries, System of National Accounts, 1993 – Glossary, OECD, Paris.
- UN, OECD, IMF, Eurostat (eds.) (1993), System of National Accounts 1993, United Nations, Geneva, http://unstats.un.org/unsd/sna1993.
Websites
- OECD Economic Outlook – Sources and Methods, www.oecd.org/eco/sources-and-methods.
| Texts | |
| • | Indicator web page |
| • | Indicator in PDF |
| Tables (xls) | |
| • | Gross fixed capital formation |
| • | Gross fixed capital formation: machinery and equipment |
| • | Gross fixed capital formation: housing |
| Graphics | |
| • | Gross fixed capital formation |
| • | Gross fixed capital formation in machinery and equipment |
| • | Gross fixed capital formation in housing |
Gross fixed capital formation in machinery and equipment
Gross fixed capital formation in housing
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