As a percentage of GDP, why is consumer spending much larger than business spending? I would have thought that business projects/capex/inventory spend is very high, while consumer spending on retail sales/consumption is low?
Every cost that a business incurs is passed through to the consumer
I agree with you that business / corporate spending is quite high, but I think we have to think about the frequency of that spending compared to the frequency of consumer spending to understand why consumer spending accounts for 60-70% of GDP in developed countries. The CFAI text makes the point that consumer spending is very stable compared to business spending which is relatively volatile ("…not uncommon for business investment to fall by 10-20 percent or more during a recession and to increase by a similar amount during strong economic upswings" (page 61)). Consumers typically spend large portions of their consumer income after tax, while businesses may be more apprehensive and discerning with their investments and spending as a percentage of GDP.
Like you, I wish the CFAI text expanded more on why consumer spending as a percentage of GDP is so large relative to business spending as a percentage of GDP, but I hope the above explanation helps.
OMGMileyCyrus