2024-03-26 11:05:00 ET
Summary
- Durable goods orders are a good lead indicator for broader capex spending in the US.
- Unfortunately, ongoing weakness here suggests investment spending will remain a constraint on overall growth, with the US’ 2024 economic prospects being determined by the consumer.
- Consumer spending accounts for nearly 70% of GDP and there are four main ways to finance that spending - income, savings, borrow more & sell assets.
Investment has lagged behind other parts of the economy
The US economy beat expectations throughout 2023, thanks primarily to the strength of consumer and government spending growth while net trade also made a positive contribution. The main disappointment was business investment. Private non-residential fixed investment is only up 11% on its pre-Covid peak, but more significantly, as the chart below shows, is tracking around 8 percentage points below where the pre-Covid trend suggests it should be. Business equipment investment has performed even more poorly with the level of spending actually down on 2019 levels when adjusted for inflation....
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Weakness In U.S. Investment Keeps The Focus On The Consumer