U.S.: Will Booming Capital Spending Keep Inflation At Bay?

More capacity may not ease growing strains on labor markets

Amid all the attention this year given to Wall Street, the Federal Reserve, U.S. consumers, and other key areas of the economy, one sector has received short shrift: capital spending. The fact is, after a slowdown in the second half of last year and early this year, business investment in new equipment and buildings is rebounding strongly, and that resurgence should continue into early 1998. The bonus, at least in the long run, is that more investment will help the economy become less inflation-prone, though the short-run impact is more iffy.

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