Third Quarter Investments Slow
Some of the largest U.S. companies in the S&P500 have slowed their spending on equipment and other capital investments, according to The Wall Street Journal.
The decrease in spending could be due to uncertainty over the future economy which has led some to cancel or postpone projects until the smoke clears. These concerns could drag on economic growth in the long run.
The trade war has been the main contributor to uncertainties over the global economy as many companies became unsure about their supply chain, pricing, and profits. Big-name companies such as Harley-Davidson Inc., AT&T Inc. and Target Corp. have slowed their investments.
Economists estimated that uncertainties over the trade war contributed to $40 billion in investments that were lost in the first half of 2019. The losses caused about a 3 percent decrease in capital spending on equipment. Investments in capital spending on equipment have grown 4 percent annually since 2000.
“Some of this will come back—projects delayed—but some of this will be permanently lost,” said Standford economist Nicholas Bloom. “Factories that never open, IT projects that get shelved or R&D projects that are passed over. So I think there is a real long-run cost to U.S. growth.”
Large companies have slowed their capital investments amid trade war uncertainties.