Moreover, many businesses, through their actions to repair their balance sheets in recent years, have built up large holdings of cash that can be tapped to finance investment outlays, and the substitution of long-term debt for short-term debt has reduced the exposure of many firms to rising interest rates. Third, robust growth in underlying productivity should continue to support income growth and economic activity.
I suspect that productivity will eventually slow from the extraordinary pace of the past few years - indeed, the recent figures offer some evidence that some of the slowing has already occurred. Nonetheless, I am optimistic that part of the step-up in productivity will be sustained and that it will be reinforced by a robust pace of capital spending.