R&D is leading laggin global ecomony forward

And despite President Donald Trump’s key economic agenda item — tax reform — having gone nowhere, investors are looking at a stock market that is up 8% this year alone, as big tech stocks have lead the way.

Economic data, meanwhile, has been fine — if perhaps a big underwhelming — as we learned on Thursday the economy grew at an annualized rate of 1.4% to start the year.

On Friday, investors will pore over reports on personal income and spending, with this report also including the latest figures on “Core” PCE, the Federal Reserve’s preferred measure of inflation.

A popular narrative surrounding the U.S. economy in recent years has been that we are mired in “secular stagnation” — or a lower growth trajectory — due to, among other things, a lack of innovation.

And while overall GDP growth rates certainly bolster the idea that economic growth in the modern U.S. economy is not the 4% or more we became accustomed to in the later half of the 20th century, there is still, despite some arguments, plenty of innovation happening across the economy. Or at least, folks are trying to make it happen.

Neil Dutta, an economist at Renaissance Macro, circulated the following chart on Thursday after the latest GDP revision was released. This chart shows that R&D, as a percent of GDP, continues to rise and, as a percent of GDP, is at levels not seen since the early 90s.

“Over the last year, private R&D spending has jumped 5.9% to 1.85% of US GDP, a record,” Dutta writes, adding that public sector R&D has also picked up, rising at a seasonally adjusted annualized rate of 6.1% in the first quarter.

“The continued improvement in R&D spending is one reason why we are upbeat on productivity growth,” Dutta writes.

Source: Bloomberg

Trader Bozhidar Arabadzhiev

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