Bickering in Washington is preventing businesses from investing in their equipment and plants, according a new report from the American Institute for Economic Research.
New orders for core capital goods have been on a downward trend for nearly a year, AIER fellow Polina Vlasenko writes.
Credit cannot be the problem, she says. Interest rates are low and profits are high. Commercial and industrial loans continue to grow from recession lows.
Something else must be behind business caution…
The most likely candidate is the raft of uncertainty emanating from the on-going fiscal debate in Washington. The Congressional Budget Office, for instance, predicted that tax hikes and spending cuts associated with the fiscal cliff could push the economy back into recession.
Luckily, other parts of the economy are looking bullish, she says. AIER’s Business-Cycle Conditions indicators (which include yield curves, stock prices and consumer spending) suggest that over the next six to 12 months the economy will continue to grow and unemployment will continue to fall.
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