That pace fell sharply toward the end of last year and into the early part of 2001. The slowdown presents an interesting puzzle for the Fed. The rapid pace of capital spending in recent years has not depended much on interest rates. The flip side is that Fed interest rate cuts may not do much to get capital spending going again. Yet, firms will continue to replace existing systems and will eventually be forced to invest in newer technologies in order to compete.
Consumer expectations are down, but what people say and do are two separate things.
Business expectations, on the other hand, can be more meaningful. If firms postpone or cancel expansion decisions en masse , the whole economy will suffer. At this point, the business outlook is very much uncertain. This uncertainty, should it continue, could lead to further weakness in the overall outlook, as businesses may be likely to avoid risk entirely. Tax cuts may help boost consumer spending growth in the second half of the year, especially if they are made retroactive to the beginning of the year.