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Why corporations are sitting on cash piles

May 6, 2014


by Bill Conerly, Oregon economist
Conerly Consulting, Businomics

Businesses are not growing their capital expenditures, though we can take a little comfort that neither are they shrinking them.

CapEx

Corporations are sitting on lots of cash, and interest rates are very low for credit-worth companies. The problem is lack of optimism. When I do see companies spending money, it’s to lower operating costs through labor or energy savings. Few companies are increasing their productive capacity (aside from energy, agriculture and high tech).

Looking forward, this is the sector that might push the economy upward. If we got enough growth that business leaders decided they needed to add capacity, then increased capital spending would start a virtuous cycle in job gains, spending gains, and further capacity additions. Don’t hold your breath this year, but there are grounds for optimism for next year.

  
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Rick May 6, 2014

Why don’t you address WHY corporations have no optimism? Although I think we all know the answer.

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