U.S. Outlook: Are corporate tax cuts making a difference?
The Tax Cuts and Jobs Act, which passed in December 2017, made several changes to federal taxes for businesses, including the full expensing of certain machinery and equipment.
But has the highly anticipated surge in business spending materialized?
For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on July 20.Key observations:
- Business equipment spending growth decelerated from 11.5% annualized in the fourth quarter of 2017 to 5.6% in the first quarter.
- The amount of cash sitting idle on corporate balance sheets hit a record high of about $1.2 trillion in the first quarter of 2018, an increase of almost 250% since the recession ended.
- There is increasing evidence that a sizable portion of the tax cut is being funneled into stock buybacks.
- Our outlook calls for nonresidential fixed investment spending growth to accelerate modestly from 4.7% in 2017 to 6.4% this year and then slow to 5.0% in 2019.