After six consecutive quarters in retreat, businesses in the third quarter increased spending on new computers and software at an annual rate of 1.1%. That marked an about-face from the first quarter’s annualized 36.4% plunge.
Indications that business spending is starting to revive are vital to future growth — because there is no political support for the government to indefinitely prop up the economy.
“That is a sign of the private sector getting some confidence back and starting to rebuild the capital stock,” Christina Romer, who chairs the president’s Council of Economic Advisers, told reporters.
“I think we’re going to be fine. My anticipation is we’re going to sort of grow moderately… We’re going to have to see if the private sector comes back,” she said.
The economy was propelled by incentives for consumers to buy homes and cars, among a series of extraordinary interventions by Washington in the market. But federal enticement won’t last forever. The cash-for-clunkers program, which sparked auto sales, has expired, and the fate of a tax credit for first-time home buyers is unclear.
The government initiatives were designed to stabilize the economy until private companies could rebound from last year’s financial crunch. With credit still tight — especially for small businesses — there have been few signs of such rebirth.
Now, resurgent equipment spending may signal that the private sector is beginning to stir, Romer said. Business spending on equipment and software peaked at $1.1 trillion in the fourth quarter of 2007 before shrinking by more than 21% amid the global downturn.
http://www.usatoday.com/money/economy/2009-10-29-business-spending-economy-romer_N.htm
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