Corporate America is outgrowing its customers

The interesting feature of the US expansion is no longer whether it survives — income-side GDP says it does — but the gap opening between corporate capital formation and the demand it is meant to serve. On a Pasinetti-Kaldor reading of the cycle, firms are reinvesting retained profits faster than aggregate output is absorbing them. That is bullish for potential output, bearish for pricing power, and the most underpriced macro story heading into 2026.

Start with the level question. Deer Point Macro's monthly income-side GDP tracker shows no recession signature, and the noise in the headline series is mechanical: Q1 was distorted by a pre-tariff import surge and inventory build, generating a record goods deficit; the following quarter unwound it, with imports collapsing enough to add 4.99 percentage points to GDP and offset a 3.17-point inventory drag. Strip the trade and stockpiling whipsaw and the underlying income run-rate is intact. The Desk reads this as a slowing but resilient expansion, not the front edge of a contraction.

The reinvestment gap

The more important diagnostic is structural. Under the Pasinetti-Kaldor growth law — g equals the retention rate times the spread of return on assets over the cost of debt, divided by capital intensity — corporate growth is currently running above realised GDP growth. Translation: firms are ploughing retained profits into capacity at a pace the demand side cannot yet justify. The mechanism is not speculative; AI and computer-related capex is the visible expression of it, lifting capital deepening and, by extension, total factor productivity. But capital built ahead of demand is, definitionally, a negative output gap

in formation.

Capital built ahead of demand is, definitionally, a negative output gap in formation.

For rates, the second channel matters as much as the first. Foreign capital inflows continue to compress the long end: Deer Point's calibration suggests a one percent of GDP increase in inflows lowers the 10-year Treasury yield by roughly seven basis points

. Combine that with a disinflationary impulse from corporate overbuild and the structural pressure on the long end is downward, even if the front end stays sticky. This is the configuration that flattens curves without recession — a regime macro desks have been slow to price because it does not fit the standard late-cycle template.

What is forecastable

Three calls are operationalisable from the dossier and worth holding to resolution. First, no US recession in calendar-year 2026 — Deer Point puts this on the yes side, and the income-side data supports it as the base case. Second, near-term quarterly real GDP printing below 1.5 percent, which is consistent with the slowing-but-resilient frame and the unwinding of trade distortions. Third, the inflows-to-yields elasticity of roughly seven basis points per one percent of GDP, which is a clean, testable rule for anyone modelling Treasury demand from the rest of the world. The dossier contains no dissenting forecaster: every quantified call sits inside the same constructive-growth, soft-yields view. That is itself a signal — and a reason to look hard for the trade on the other side.