Economist Ward McCarthy at Jefferies notes that business investment “continues to be a historically low percentage of GDP” for the current business cycle.
He resolves that by saying businesses operating with aged equipment will soon unleash pent-up demand. He compares it to consumer buying of autos, which jumped in the past two years.
But consumer buying is not comparable to business investment. Most people have no alternative to buying a car but companies can relocate to China and productive equipment can be maintained much longer than automobiles.
Canada’s recovery is much further ahead than the United States and there are still no signs of business investment. If economists are basing 2015 forecasts on a jump in business investment, they’re on unsteady ground.