Investment in equipment and software is estimated to have risen at a 5% rate in real terms in the fourth quarter and a subpar 3% over the four quarters of the year. However, the emergence of a sustained and broad-based pickup in capital spending will almost surely require the resumption of substantial gains in corporate profits.
The analysis takes a three-year centered moving average of the CBO’s estimates of the cyclically adjusted federal deficit, which can be quite volatile from year to year, and compares this average for the year prior to the new Administration to the average in the sixth year of the new Administration.