A greater-than-expected growth in business spending this year has raised speculation that the US has once again entered into a "Goldilocks economy" -- not too hot, not too cold, juuuust right. The last time we heard this kind of talk was in the late '90's... which seemed like a Goldilocks economy at the time, but was actually an overheated one that led to the bursting of the dotcom bubble.
In 2004, business spending on equipment and software rose 13.5%. Economists are raising projected growth this year, and are especially encouraged because much of this investment is for expanded production rather than just repairs and replacements. Instead of a projected decline in capital orders for January, orders actually increased by nearly 3%. The expansion also appears to be across multiple industries.
Strong business spending is a particularly good sign for any economy, not only because it demonstrates growth and confidence in the future, but it takes pressure off the consumer segment of the economy while ultimately creating jobs.
Economist note, though, that the continued trade deficit and the lackluster performance of the Japanese and European economies could hold back US growth. Volatility of oil prices will surely factor in as well. But hopefully, the economists are right, and we are entering a period of sustained economic growth in which everyone can benefit.
Source: The New York Times
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