{"id":118136,"date":"2025-08-29T10:30:09","date_gmt":"2025-08-29T10:30:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/118136\/"},"modified":"2025-08-29T10:30:09","modified_gmt":"2025-08-29T10:30:09","slug":"rising-input-prices-curb-appetite-for-capital-expenditure-investment","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/118136\/","title":{"rendered":"Rising input prices curb appetite for capital expenditure investment"},"content":{"rendered":"<p>Business expectations of input prices pushed higher in the first eight months of the year, while manufacturers\u2019 expectations for expansion weakened.<\/p>\n<p>One gets the sense that, excluding large technology companies, pricing pressures are causing thinner margins. This in turn reduces the appetite for risk-taking\u2014defined as investments in software, equipment and intellectual property.<\/p>\n<p>In a normal business cycle, input prices and capital expenditure should be strongly correlated. During the months of an economic recovery, you would expect input prices to rise as demand grows\u2014therefore businesses would increase capital expenditure to meet that growing demand.<\/p>\n<p>Conversely, you would expect input prices to decline as demand lessens during months of an economic downturn. As a result, you would expect intentions for capital expenditure to decrease as businesses take a defensive posture.<\/p>\n<p>But during the first eight months of 2025, the expectations were that tariffs would cause input prices in the manufacturing sector to move higher, according to manufacturers surveyed by five regional Federal Reserve banks.<\/p>\n<p>With demand at risk, expectations were that manufacturers would cut back on capital expenditure to levels associated with the recessions of 2008-2009 and 2020.<\/p>\n<p><a href=\"https:\/\/realeconomy.wpenginepowered.com\/wp-content\/uploads\/2025\/08\/MM-0829.png\" target=\"_blank\" rel=\"noopener nofollow\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-26717 size-mailchimp-images\" src=\"https:\/\/realeconomy.wpenginepowered.com\/wp-content\/uploads\/2025\/08\/MM-0829-560x358.png\" alt=\"This chart shows U.S. manufacturers' expectations for capital expenditure and prices paid.\" width=\"560\" height=\"358\"  \/><\/a><\/p>\n<p>It\u2019s not unusual for these surveys to indicate dramatic month-to-month changes in intentions. The August survey included a wide range of responses to expectations for capital expenditure, from the negative response in the New York region to the positive response in Philadelphia.<\/p>\n<p>In our estimate, the wide range of responses suggests lingering uncertainty regarding the uneven and ever-changing imposition of trade taxes and their effects on economic growth.<\/p>\n<p>The takeaway<\/p>\n<p>Manufacturers continue to expect higher input prices while holding mixed expectations regarding capital expenditure in the next six months.<\/p>\n<p>We have yet to see the full effects of tariffs on input prices, most likely because <a href=\"https:\/\/realeconomy.rsmus.com\/market-minute-what-trade-policy-whiplash-could-mean-for-inventories\/\" target=\"_blank\" rel=\"noopener nofollow\">many manufacturers front-loaded their inventories ahead of time<\/a>.<\/p>\n<p>The impact of delayed capital expenditure will have longer-term implications for the economy\u2019s potential.<\/p>\n<p>Get Joe Brusuelas\u2019s Market Minute economic commentary every morning.<a href=\"https:\/\/realeconomy.rsmus.com\/subscribe-to-market-minute\/\" rel=\"nofollow noopener\" target=\"_blank\">\u00a0Subscribe now<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"Business expectations of input prices pushed higher in the first eight months of the year, while manufacturers\u2019 expectations&hellip;\n","protected":false},"author":2,"featured_media":118137,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[37],"tags":[28,112],"class_list":["post-118136","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/118136","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=118136"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/118136\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/118137"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=118136"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=118136"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=118136"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}