Amidst high inflation, borrowing costs, and persistent labor challenges, businesses have been forced to make investments that enhance efficiency. The RSM US Middle Market Business Index survey has shown an increase in actual and planned capital expenditures since the start of the pandemic. These investments are now yielding positive results across the economy.
As recession risks diminish, businesses are becoming more assertive with their investment plans, as revealed by the first-quarter survey results. Nearly half of middle market senior executives surveyed reported increased spending on capital expenditures, with 59% expecting to do so in the next six months. However, it is too early to suggest a permanent change in productivity due to high borrowing costs.
While popular explanations such as work-from-home practices or investments in artificial intelligence have been proposed as drivers of a structural shift in the labor market, research on these topics remains inconclusive. The impact of artificial intelligence investments will not be significant for another three to five years. In the meantime, short-term productivity gains resulting from upgraded equipment, factories and technologies in recent years will help sustain a strong economy this year rather than one that is overheated.
This positive economic momentum translates into improved economic prospects for all Americans regardless of their income level.
