The strength of US corporate profits has not translated into investment spending as it has done in the past
The strength of US corporate profits has not translated into investment spending as it has done in the past. The proportion of after tax profits going to private non residential fixed investment (see chart) is as low as it has been for over sixty years. The low propensity of business to invest has been retarding US growth but now offers an opportunity. Last month, 48.6% of businesses surveyed by the Philadelphia Federal Reserve said that their investment spending would be higher in the coming year than in the year gone by. This compares with 35.7% in 2012 and 39.4% in 2013, when they were also asked the same question. The sentiment appears to be edging toward a point where the investment cycle picks up speed. This will be a critical next stage for US equity prices as well as, globally, raw material producing companies.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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