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Justin Fox

Businesses Are Investing More in 2018, But It’s No Boom

Capital spending is up so far this year after a weak 2016 and 2017. It’s not exactly setting records.

Building on improvement.

Building on improvement.

Photographer: Kevork Djansezian/Bloomberg

For several months now, consumers of U.S. business media have been subjected to what you could call capex whiplash. That is, one day you’ll read or hear that business capital spending is booming, and a few days later you’ll be told that it is not.

I had been confused by this, but just a few minutes of reading and chart-making made clear that the main thing driving the differing assessments is simply the time frame. If you compare current business capital spending (that is, spending on fixed assets such as equipment, buildings and land) with that of 2017, or 2016, it looks great. If you compare these capex gains with those of past expansions, or even earlier in the current expansion, they look … OK. And given how much cash U.S. corporations suddenly have on their hands thanks to the big tax cuts approved by Congress and signed into law by the president late last year, “OK” is perhaps slightly disappointing.