Discussion Paper

Are Capital Expenditures Getting Too Expensive?

Abstract: Capital expenditure (CapEx) is business spending used to acquire, improve, and maintain physical assets, such as buildings and machinery. These projects often require extensive planning because once in motion, they tend to be expensive, drawn out, and costly to stop. As such, a firm's willingness to undertake capital expenditures can be indicative of its future economic outlook. For example, a retail business may be less likely to invest in opening a new storefront if it's pessimistic about future demand for its product. In our monthly Fifth District surveys, we regularly ask firms if they have made changes to their current and expected capital expenditures. Additionally, as part of the Q1 2023 CFO Survey, we asked firms about their capital expenditures expectations. We find evidence that firms are slowing their pace of capital investment; in our monthly business surveys, the share of firms reporting month-over-month increases in capital expenditures has been trending downward since April 2022.

Keywords: capital expenditures; CFO Survey; Interest rates;

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Regional Matters

Publication Date: 2023-05-05