Thursday, July 19th 2018

Business Investment Being Counted on for Growth in U.S.


Monday, February 22nd, 2010

A recent survey by the National Association for Business Economics found that of the 48 economists surveyed, the majority agreed that business investment will be the primary generator of economic growth in 2010, to whatever level it may reach.

While there has been a lot of hype over the growth numbers released by the Commerce Department, asserting the economy in the United States grew by 5.7 percent in the final quarter of 2009, they were largely irrelevant and dubious data, as most of that came from businesses replenishing themselves, and that is still considered the chief engine of growth going forward, which in reality isn't growth at all, but bringing things back to prior levels before the recession.

As part of that replenishment, the economists stated that most of the increase in business spending will come in the acquisition of new equipment and software. They also believe this will generate so-called job growth, which again, will be a sort of replenishment and not job creation.

The point is this isn't economic growth, this is a period of bringing things back closer to where they were before hard times, including inventories, employees and equipment. To call this growth is to wrongly attribute to it something that really isn't happening.

Consumers will continue to hold back on spending because of the jobless rates, and that means that business replenishment will be the sole agent of growth in 2010 and probably 2011. That won't carry much weight once things are brought back to some stability, which won't take long.

With consumers holding back on spending, there is nothing else to move the company forward than this short term period of businesses buying what they need to operate at levels where growth is very minimal.

Where real business growth is expected to happen is in emerging markets, which isn't going to help the job market in the U.S. or company growth, which should in my opinion be stagnated for some time.

All of this will probably be just a temporary upswing which once completed, could just as easily fall back down again, as far as the number of workers hired to take care of replenishment, as well as amount of money companies will put into inventory and updated equipment.

This is pretty much a non-event which does nothing to really identify that we're not in a recovery, but at best, a holding pattern economically.



Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com





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