Suppose we could design the next phase of the U.S. economic recovery. What would it look like? Here's one pleasing vision. Business investment in plants and equipment — factories, computers, freight cars, software, machine tools — would take the lead. This would boost job creation and productivity (aka efficiency), enabling companies to increase wages without raising prices. It just might come true. That's the message from the government's recent second-quarter report on gross domestic product (GDP), which measures the economy's growth.
Business investment rose at a strong 8.4 percent annual rate after adjusting for inflation. Although the spurt partly reflected a bounce back from a weak first quarter, some economists think it marks a significant turning point.
"Companies are beginning to spend again," says Nariman Behravesh of IHS Global Insight. Mark Zandi of Moody's Analytics is equally optimistic. "Businesses are shifting their focus from controlling costs to revenue [i.e. sales] growth," he says. "This requires that ... they expand their operations."