The recent recovery in the U.S. economy could fizzle, because businesses are still reluctant to pony up for new equipment and technology, says FedEx CEO Fred Smith.
“Business investment went up somewhat in the fourth quarter but is far below what it ought to be in a cyclical recovery like this,” he says.
The economy expanded a whopping 5.9 percent in the fourth quarter. But many experts note that the bulk of gains came in inventories.
And they say it’s questionable whether that restocking of goods will translate into growing sales.
Companies are in a tough spot because of uncertainty over the economic outlook, Smith told the Financial Times.
FedEx and others cut their capital spending during the height of the recession, which began at the end of 2008. That’s because they didn’t know when demand would recover.
Now increased investment spending will be necessary to sustain the economic rebound, Smith says. “In my opinion, for consumers to spend, you have to get business investment up because that is what creates the jobs,” he said.
“I don’t think you will see substantial increases in employment until you see substantial increases in business investment.”
Real-estate mogul Sam Zell shares some of Smith’s concern. “Conditions are getting better,” Zell told Bloomberg.
“But there’s a lot of uncertainty, and the real question is: Can confidence return enough so that what you call the green shoots or whatever would continue forward?”
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