Investing in the Future
|It is unique to the current cycle that businesses today spend more on intellectual property products than any other category of capex. When combined with a building boom in high-tech factories and a surge in outlays on information processing equipment, this opens the door to future productivity growth. At the risk of stating the obvious: as the economy gets bigger, businesses spend more money. Yet for all the hand wringing and boardroom debate about how much to spend and where to allocate that capital, business spending is remarkably steady. In good times and bad, in data stretching all the way back to the 1940s, the money that businesses spend each year typically comprises between 10% and 15% of GDP. Through the second quarter, spending is right in the middle of that range (Figure 1). Capital expenditures have actually grown at a reasonably steady clip in recent years. That may be surprising in a world in which the ISM manufacturing index has signaled contraction for nearly two years, manufacturing production has more-or-less stalled and in which durable goods orders have flat-lined. When small businesses are asked about their capital investment plans, they’ve rarely been more pessimistic than they are today. Yet despite this murky backdrop, business fixed investment (BFI for short) has seen uninterrupted growth since the pandemic, running at a near 5% annual clip on average in recent years.Summary
Capex is stronger than you may think
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.