Gross private domestic investment is made of 1) new construction, 2) new capital (machines, trucks and equipment), and 3) changes in inventory. It excludes investment made by government and investment made outside the country. New construction includes all forms of new building, be it for rental purpose or for private residential purpose. Changes in inventory captures the goods produced in one year and sold in future years.
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When a company builds a plant and installs machinery and equipment: that is an investment, i.e. an increase in capital. By convention, a private house is considered an investment. The reason is that a private house may later be rented and it is not possible to know for which purpose, rental or private use, a house is built in the first place. |
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