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Pulse Points

Noted economists analyze three critical focal points for the economy over the next year

By Staff Writer | Updated on August 01, 2006

CAPITAL INVESTMENTBy Diane C. Swonk, Mesirow Financial

Until recently, businesses have been reluctant to put their money where one might think their profits might take them–capital investment. Instead, companies used their excess cash to buy back stock at a record pace, increase their dividend payouts and improve their market position through mergers and acquisitions. Indeed, very little cash was invested in upgrading capital stock, expanding capacity or betting on future growth. Those trends, however, are about to change as firms are not only committing more to new technologies, but also are trying to catch up on investment deferred at the start of the recovery. The result will be a late-in-the-cycle investment boom and a reacceleration in productivity growth–much like the capital spending surge that we saw in the late 1990s.

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