Business investment grew only 2.2 percent from the previous year, representing one of the worst performances seen in the six-year economic expansion, the Wall Street Journal reported.
“Companies appear reluctant to step up spending on the basic building blocks of the economy, such as machines, computers and new buildings,” the article states. “Many factors have conspired to limit growth in investments during this economic expansion. Businesses hesitated to commit to projects amid uneven consumer demand and concerns about the regulatory environment.”
Additionally, many companies have decided to spend money on stock buybacks and dividends, instead of investing in equipment and facilities, hoping this move will boost productivity and wages, and eventually bolster share prices.
For example, Kraft Heinz Co. said it would close seven plants to cut $1.5 billion in costs, but would increase its quarterly dividend by 4.5 percent. This “will eliminate excess capacity and reduce operational redundancies, making us more competitive,” said the company’s chief financial officer.