Many economists forecasting on accelerating U.S. GDP growth are banking on hope that business investment will pick up in 2014.
THE STRONGEST CASE FOR CAPEX
The answer lies in CAPU … in other words, capacity utilization rates. While hardly yet at a peak, at 77% for U.S. manufacturing they are at levels that in the past touched off a moderate capex growth cycle. As the chart below shows, there is a slight lag but a decent 65% historical correlation. History also shows that once 77% is breached in terms of CAPU rates in an up-cycle, capital spending in real terms in the ensuing years averages out to be 0% growth — enough to add an increment 60 basis points to headline GDP trends.
Here’s Rosenberg’s chart: