Capital Markets: Observations & Insights

Business Spending Boost

Business Spending May Lift Productivity

• Stronger business spending should drive innovation as businesses have more cash to deploy to research and development and capital expenditures • Historically, increases in business spending lead to higher productivity

Capital Intensity vs. Labor Productivity (1988-2016)

R 2 = 0.64

10.0

= Year

8.0

6.0

Higher business spending leads to higher productivity

4.0

2.0

0.0

-2.0 % Increase in Business Spending

0.0

1.0

2.0

3.0

4.0

5.0

% Increase in Productivity

Source: Bureau of Labor Statistics. Note: “Business Spending” is Capital Intensity and “Productivity” is Labor Productivity which is advanced one year

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