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Why corporations are sitting on cash piles

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by Bill Conerly, Oregon economist
Conerly Consulting [3], Businomics [4]

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

CapEx [5]

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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