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An Embarrassment of Riches

Courtesy of Pacifica Partners

One of the few things Wall Street, Main Street and politicians of all stripes can agree on is that the economic recovery since the last recession has been slower than expected. If we listen closely to the speeches of various policy makers, there is an undertone of frustration in their voices. The frustration stems from the tepid and halting pace of the economic recovery. Policy makers feel like they have done all that they can and they are starting to run out of runway with respect to getting the economy to reach liftoff.

The ‘running out of runway' analogy is rooted in the belief that with interest rates about as low as they can go, any further reductions will not have a meaningful impact on the economy. In short, there are no more arrows in the quiver of policy makers. As real estate markets in the US, UK and Canada continue their rebound since the end of the last recession they have made a meaningful impact upon economic growth and confidence. The auto industry has also been a key contributor and has lent a much needed hand to global economic growth. Historically, this is how most economic recoveries begin.

This time is different. Once the initial recovery led by the auto and real estate sectors has become entrenched, capital expenditures by businesses tend to then strengthen economic momentum.  Capital expenditures consist of business investments in things such as new software, plants, property and equipment. Across the globe, this pillar of the economy has been missing.  The level of capital expenditures across most nations has been slow to recover since the recession of 2008.

Read more at Pacifica Partners