The long-awaited pickup in U.S. business investment will take place this year. No, really.
The oldest capital stock in decades, more clarity on fiscal policy, improving growth prospects, and companies awash in cash mean the stars have aligned to boost spending on commercial structures and equipment, according to economists such as David Rosenberg and investors such as Brian Jacobsen. Companies from Macy’s Inc. to Warren Buffett’s railroad are planning on increasing capital outlays to enhance competiveness.
At the same time, Moody’s estimated that as much as 58 percent of that cash is held overseas as companies take advantage of favorable tax conditions. That would make it more difficult for firms to spend those funds in the U.S.
Nonetheless, capacity utilization, which measures the portion of a plant that is in use, shows companies are running out of other options for boosting production, Harris said. The gauge climbed to 78.4 percent in February, according to Fed data.