Business Spending Forecast

Economic Forecasts

Business Spending Shows a Bit of Life

Kiplinger’s latest forecast on business equipment spending

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GDP 2019 growth will be 2.3%; 1.8% in 2020 More »
Jobs Job gains of about 150,000 per month in ’20 More »
Interest rates 10-year T-notes staying around 2% until trade war ends More »
Inflation 2.1% in ’19, up from 1.9% in ’18 More »
Business spending Up just 2% in ’19 amid uncertainty of trade war More »
Energy Crude trading from $50 to $55 per barrel in December More »
Housing 3.5% price growth by year-end ’19 More »
Retail sales Growing 4.3% in ’19 (excluding gas and autos) More »
Trade deficit Widening 7% in ’19 More »

Business investment in new equipment picked up in October, reversing the August-September decline. Both shipments and orders were up. Notable increases occurred in computers and machinery.

The stabilization was welcome news, but spending is still likely in for a prolonged slump because of the global economic slowdown and uncertainty about the outcome of the U.S.-China trade war. The two leading economies are engaged in a tit-for-tat battle that has each slapping successive rounds of penalties against each other’s exports. Global growth is slowing as trade tensions have ramped up. Europe’s outlook is deteriorating as its exports to China soften, while China itself is experiencing a decline in its exports that is putting its economy under strain.

Another drag on spending is that U.S. aircraft maker Boeing has not yet been able to get its grounded 737 Max aircraft certified as safe to return to service. A return will likely not happen until sometime next year at the earliest. Even when approval is given, the Federal Aviation Administration is requiring that each Max aircraft go through its own inspection process rather than Boeing’s. That is likely to delay the full return of the fleet.

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A scant 2% rise in capital spending is in store this year, before shrinking to 1% growth in 2020. New orders may have already peaked this year, and will be completely flat, if not down, in 2020.


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