Investment falling as businesses anticipate economic problems
While House Republicans have made it a priority to protect business owners during negotiations over the so-called “fiscal cliff,” there are signs that investment as businesses seeing more economic problems coming:
U.S. companies are scaling back investment plans at the fastest pace since the recession, signaling more trouble for the economic recovery.
Half of the nation’s 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next, according to a review by The Wall Street Journal of securities filings and conference calls.
Corporate executives say they are slowing or delaying big projects to protect profits amid easing demand and rising uncertainty. Uncertainty around the U.S. elections and federal budget policies also appear among the factors driving the investment pullback since midyear. It is unclear whether Washington will avert the so-called fiscal cliff, tax increases and spending cuts scheduled to begin Jan. 2.
Companies fear that failure to resolve the fiscal cliff will tip the economy back into recession by sapping consumer spending, damaging investor confidence and eating into corporate profits. A deal to avert the cliff could include tax-code changes, such as revamping tax breaks or rates, that hurt specific sectors.
The Wall Street Journal does explain that the economy could see a boost when and if a deal is made to avoid the “fiscal cliff.” Don’t take that as a sign of approval from businesses and investors, but rather sign of them knowing what exactly they’re dealing with moving forward.