Business Spending Forecast

Economic Forecasts

Business Spending Likely in for Long Slump

Kiplinger’s latest forecast on business equipment spending

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Business investment in new equipment is likely in for a prolonged slump because of the global economic slowdown and because of 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. Britain continues to grapple with its long-delayed departure from the European Union. A disorderly exit would disrupt supply lines between Britain and the EU, potentially wreaking economic damage on both sides if shortages and anticipated logistic snarl-ups materialize.

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.

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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September orders and shipments of nonmilitary goods excluding aircraft dropped for the second time in three months. This category receives attention because it serves as a proxy for business investment. Weak shipments indicate that factories are less busy and likely will be operating at lower capacity in the future because order backlogs are being worked through faster.


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