Tags: business | capital spending | economy | new york times

NYT's Irwin: Business Capital Spending Lags, Hurting Economy

By    |   Tuesday, 22 July 2014 01:55 PM

Business capital spending is sluggish, and that puts a damper on productivity, which in turn puts a damper on the economy, notes New York Times columnist Neil Irwin.

"Five years into the economic recovery, businesses still aren’t plowing much money into big-ticket investments for the future," he writes.

"Non-residential fixed investment, [which includes] equipment, software, buildings and intellectual property, still hasn’t bounced back to its pre-crisis share of the economy, let alone made up for lost ground from the record lows of 2009."

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Equipment spending has averaged 5.2 percent of GDP over the last five years, down from 6.5 percent over the previous 50 years, according to The Wall Street Journal.

A closure of that gap would create $220 billion in annual economic activity and maybe 2 million jobs, Irwin writes. But the ramifications may be broader.

"Capital spending improves worker productivity. And worker productivity improves living standards," Irwin says.

"Less capital spending by businesses means less investment in the kinds of equipment, software and intellectual property that will make the economy more competitive over the long haul."

The outlook for future spending isn't rosy, The Journal reports.

Only 44 percent of CEOs in a second-quarter survey by the Business Roundtable expect their companies' capital expenditures to increase in the next six months, down from 48 percent with that expectation in the first quarter.

And a poll of economists by the National Association for Business Economics shows they expect business investment on equipment and industrial production to barely top last year's rise of 3.1 percent.

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Business capital spending is sluggish, and that puts a damper on productivity, which in turn puts a damper on the economy, notes New York Times columnist Neil Irwin.
business, capital spending, economy, new york times
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2014-55-22
Tuesday, 22 July 2014 01:55 PM
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