Economic Preview: U.S. economy Remains missing this one Crucial piece to happier days

What to do when you have a super-demanding boss
August 19, 2017

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The U.S. is like a machine, experiencing 2% increase year after year. However, the economy is still missing a few important parts. The U.S. economy is gliding ahead like a sailboat on the mildly windy day, but it can’t race forward like a cigar ship unless businesses gun the throttle on investment. Early in the presidency of former businessman Donald Trump, companies have ramped up investment. But they still aren’t spending at a rate that will move the needle on the market’s speedometer. Perhaps buoyed by a more business-friendly White House, firms increased investment in the first five months of 2017 before spending slacked off a bit in June, based on a measure called core orders for durable goods. The latest report for July will come out Friday. Still, investment remains about 10% below the postrecession summit set almost three decades ago. “If firms were truly acting on lofty expectations we’d be seeing more vigorous growth in capital spending,” said Richard Moody, chief economist of Regions Financial. Lackluster business investment is among the chief reasons the U.S. continues to bob along at about 2% annual growth, less than two-thirds the historic average. Investment is what spurs new inventions, makes it easier for workers to do their jobs and allows the economy to expand at a faster pace. A souped-up economy then generates higher profits, fatter dividend payments and larger paychecks for workers. Whatever expect businesses may have had earlier in the year, however, has been clouded by the collapse of a flailing Trump White House to push through tax cuts, more spending on public works and other measures to aid large and smaller companies alike. Earlier this week, a variety of high-profile CEOs of major U.S. companies like Merck, Under Armour and J.P. Morgan resigned en masse from a set of White House advisory councils following Trump’s controversial handling of violent demonstrations in Virginia. Also read: Trump’s pro-business schedule at risk after corporate America abandons president Now hardly any CEOs want anything to do with the president publicly even though they still encourage big parts of his agenda. They have also grown increasingly pessimistic about if or when he will achieve a number of his top priorities. Also read: Trump dumps Bannon, but White House wounds fester with small cure in sight Others outside the corporate sector have also taken note. In a meeting of senior Federal Reserve officials last month, many pointedly noted that Trump’s plan for monetary stimulus was likely to be smaller and take more time to enact than previously expected. Even if these measures are adopted, relief will not truly began to flow to business until next year. So there is little reason for them to boost investment given all of the uncertainty in Washington.

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