The Bureau of Economic Analysis released third-quarter gross domestic product numbers yesterday, and overall real growth at 3.5 percent was pretty good.

But examining the components of GDP reveals a more disturbing picture. While consumption, exports, and the government sector were up, private investment has fallen through the floor.

Figure 1 reveals a dramatic collapse of private investment over the last two years. In nominal dollars, private investment in 2009 has only been at about the same level as the bottom of the last recession eight years ago (BEA Table 1.1.5).

Figure 2 has the same data in real 2005 dollars (BEA Table 1.1.6). It shows that private investment is stuck in a rut at about 17 percent below the lowest level reached at the bottom of the last recession.

The third quarter GDP numbers show that the economy is only starting to "recover" because of growing government and expanding consumption, which has been artificially inflated by large government transfers.

Business investment continues to be in a deep recession. Companies are simply not building factories or buying new machines and equipment.

Why not? I suspect that many firms are scared to death of higher taxes, inflation, health care mandates, increased labor regulation, and other profit-killers coming down the road from Washington. That is speculation, but I haven't heard a better explanation of the death of private investment in America.

Data note: the measure of “government” here is government production as a share of GDP, not total government spending, which includes transfers.