From Torsten Sløk:
Private sector R&D investment is growing at the fastest rate since the recession, see chart below. And more R&D normally means more capex and higher productivity. Note also how R&D is weak in the first few years after a recession and then begins to take off as corporate confidence comes back.
Maybe this will pick up the slack from exhausted consumers. The pundits are wring their hands that American consumers are not behaving as they should. It appears that they are actually saving money and paying down debt instead of buying things. Considering that the savings rate is less than half of what it was a generation or two ago, this trend could continue for a while (or it might not).
Be careful there. Consumers are behaving like they should be. February cold is a major misread. Gonna be some nostril flaring in April imo from the econ-bears.
fwiw, after the deflator is released, I suspect real retail sales in february will be positive slighty despite fall fall in autos. January was quite impressive.
More on deleveraging. They are wondering how low the debt to PI ratio can go. With baby boomers moving into retirement and millenials starting to wise up to the perils of student loans, it would not surprise me if we have much further to go on deleveraging of the average consumer over the next decade.
Well, non-residential investment is 13% of the GDP.
Structures account for 22%, Equipment 48%, intellectual property 17%, and R&D … only 13%.
I believe oil and gas related capex reduction will have a much bigger impact than R&D, despite R&D’s upside trend.
This is only R&D, and there is a big slip between R&D, building new plant & equipment and productivity growth.
Business spending on plant & equipment is largely a function of trailing earnings growth. But that has weakened sharply in late 2014 and implies that business fixed investment is likely to weaken in early 2015.
That doesn’t imply that at all. Business spending decelerated in the winter and is recelerating in March, which I can already see from my own company.
When the CEOs are incentivized by the Fed and by the tax policy to “invest” in their own shares, often by borrowing and leveraging up, I wouldn’t expect a “tsunami” of CapEx. Especially since the domestic sales point to the end of the cycle, not the beginning.
And as far as R&D… I see the $100k drugs that very few people can personally pay for and that we, ,collectively as a nation, soon won’t be able to pay for as part of Medicare/Medicaid/Obamacare. I also see a lot of R&D going into the F-35 fighter jet, like redesign of the bomb bay (it cannot hold the most advanced bombs the DoD has), redesigning the engines, redesigning the fuel tank to prevent it from exploding (all paid for by taxpayers according to the cost+ formula.) I see a lot of R&D gong into shale oil/gas extraction. I just wish a little more of it would go towards preventing tap water from becoming combustible liquid and to research how hydraulic fracturing causes (or not?) seismic events.
The only truly successful R&D I see are in the fields of creating new burger and new burritos and, of course, increasing the speed of data transfer between the HFT servers.
so with out the government, no real investment in R&D. but lots of investment in stock buy backs
Maybe. We have see a pretty big increase in Capx from our customers. Could this mean that Josh Brown will finally be right? http://ritholtz.com/2014/04/corporate-capex-opportunity
Truthfully if the timing is only off by a year it is still a good call in my book.
The chart suggests not the cusp but the apex of a capex boom
Heh, yes, I, too, don’t ‘get it’. ;)