Consumers have been the main driver of this expansion, but with the stock market and consumer sentiment weakening, spending must slow. For the last eight years, consumer spending has been rising faster than income, driving the saving rate negative for the first time in history. Slower consumer spending will result in less need for new capacity, both in industry and retailing. Manufacturing is already in recession because of the widening of the U.S. trade gap. The strong dollar and weak growth outside the United States is pushing orders down.
Lower orders force cutbacks in capacity plans, cutting investment.
The major drivers of electrical equipment are all likely to show slower growth in 2001. Excluding high-tech and motor vehicles, the slowdown is from 6.4 percent in 2000 to 3.0 percent in 2001. Higher interest rates this year will slow building activity. Nonresidential buildings will slow from a 7.2 percent growth in 2000 to only 2.8 percent in 2001. After rising 1.4 percent this year, public utility construction will drop 3.1 percent next year.