"One of the hopes, or more accurately, fantasies of a few months ago was that increased business investment would offset slowing consumer spending. This forecast defied basic logic. Why would businesses take on more risk if consumer buying, the big driver of the economy, was sluggish? One would expect lower rather than higher capex.
And that's precisely what we are seeing. A Financial Times story says that business analysts forecast a significant decline in capital spending in the US and Europe. Some experts argue that the projections are too dire and that companies are lowballing their requirements. Others say that the figures are misleading, since large corporations are increasingly investing in operations in emerging markets."
Given that consumer spending is slowing, then a slowing of business investment would seem to radically increase the chances of recession in the US sometime soon.
No comments:
Post a Comment