Thursday, February 25, 2016

A Good Sign for GDP

After GDP growth slipped to just 0.7 percent in the fourth quarter of last year, many observers worried that the American economy might be headed for recession. But there was some good news yesterday in a note from Citigroup to its clients: Capital spending for most American business is headed upward.

For all the businesses surveyed excluding energy companies, capital expenditures are expected to pick up 4.2 percent in 2016. That's even stronger than the 2.4 percent increase we saw last year.

But the energy sector remains a major sticking point. When the energy businesses are added back to the sample, the businesses plan to pay out $587 billion in capital expenditures this year, which is  down 5.2 percent from 2015. At least that's a smaller rate of decrease than we saw in 2014, when that number dropped by 7.4 percent.

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