Aggregate private investment

Aggregate private investment is estimated to reach $4,411.7 trillion in 2025, with a modest growth of 1.8% for the year. This growth is sustained by ongoing interest rate cuts initiated by the Federal Reserve in 2024. However, positive momentum is counterbalanced by heightened inflationary pressures due to new tariffs on goods from Mexico, Canada, and especially China. These tariffs, imposed by the Trump Administration, have increased production costs, discouraging discretionary and expansionary investments. Businesses and consumers are responding to ongoing price uncertainty and global economic volatility with caution, keeping the growth rate of aggregate private investment moderate.

Over the five years leading to 2025, aggregate private investment has shown notable volatility and resilience. In 2021, a robust economic rebound and low mortgage rates spurred significant growth in residential construction, supporting an 8.8% annual increase. Investment continued to grow in 2022 by 6.0%, even amidst inflation levels not seen since the early 1980s. The Federal Reserve responded with several interest rate hikes as geopolitical instability increased energy prices. Despite challenges, confidence in the underlying economy sustained private investment growth. Persistent high interest rates in 2023 tempered further growth, with a marginal increase of 0.1% in aggregate private investment as tighter monetary policy took effect. The Federal Reserve's interest rate cuts in 2024 provided some relief, but benefits have been gradual.

Macroeconomic headwinds like rapidly changing monetary policies, supply chain volatility, and shifting corporate confidence have dominated the investment environment throughout this period. Business investment, comprising 60.0% to 80.0% of aggregate private investment, has been highly sensitive to borrowing costs and long-term policy risks. Large swings in energy prices and global commodity markets have influenced nonresidential investment, while the residential segment expanded during low interest rates but plateaued as borrowing became costlier.

Overall, aggregate private investment displayed moderate growth from 2020 to 2025, increasing at an average annual rate of 4.1%. The performance reflects the interplay between monetary tightening, shifting global conditions, and periodic regulatory interventions.