Businesses Still Aren’t Investing Much

Dean Baker points to this report from the Washington Post on Friday:

The Commerce Department report showed a robust contribution from business investment, which rose more than 6 percent. That seemed at odds with Thursday’s Census Bureau report that nondefense capital goods orders, excluding aircraft, fell 0.1 percent in March and that preliminary results from earlier months had been revised lower.

Baker explains why there’s no contradiction here at all, but naturally I prefer showing it in chart form (I’ve removed recessions to make the chart easier to read):

There are two things to note. First, growth of 6.1 percent is not especially robust. It’s OK, but it’s been higher than that plenty of times. Second, it went down in Q1. What’s more, as Baker explains, this mostly tells us about investment decisions made at least a year ago. To get a read on current levels of corporate optimism, you want to look at orders for capital goods:

There’s just no there here. Business investment is at normal levels; it went down a bit in Q1; this has nothing to do with current corporate decisionmaking anyway; and orders for capital goods have been pretty lethargic since the tax plan passed. Let’s check back in a year, OK?

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate