Business investment in the fourth quarter of 2008 was estimated to have fallen by 3.9% from the previous quarter and 7.7% on the fourth quarter of 2007. For manufacturing, the picture was more dire: manufacturing investment fell 11% from the third quarter and 15.7% from the fourth quarter of 2007.
Manufacturers passed up the debt binge of the past decade. Instead, they pursued a range of strategies – from increased innovation and investment to new market entry – in order to improve their competitiveness. Yet all signs suggest the sector is bearing the brunt of the financial market collapse.
This quote from Howard Archer, economist at Global Insight pretty much sums up the perfect storm battering business investment:
“Businesses are increasingly and substantially scaling back their investment in the face of sharply weakening demand, rising levels of spare capacity, worsening cash flows and very tight credit conditions, deteriorating profitability, and serious concerns and uncertainties about the potential length and depth of the recession.
On top of this, the marked downturns in the commercial property sector and the housing market are substantially depressing construction investment.“
The upshot of today's data is that it reflects the terrible economic condititions that troubled manufacterers at the end of 2008. The bad news is that Howard Archer's perfect storm doesn't look like subsiding.