The Investment Boom…or Not | Econbrowser
Fixed nonresidential investment is rising at a rapid clip. However, there are some nuances to the headline story.
Some sizable portion of recent investment is associated with the mining/drilling/fracking phenomenon.
For the moment, investment looks like it should be sustained. However, should oil prices decline, or the spigot of cash diminish (see McLean/NYT today), then the support coming from this sector might disappear. (This article discusses light tight oil (LTO) sector cash flow, financing, and prospective capital investment.)
In addition, investment in equipment, while rising overall, is declining in the industrial sector.
Right now, increased investment demand coming from the accelerator is more than offsetting the drag coming from higher policy uncertainty. As the effects of the tax cuts wear off, we should expect the balance to shift.
September 3, 2018 at 07:20AM https://ift.tt/2N7u1yF