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Jul 9th 2010, 11:21 by The Economist online | NEW YORK
ALL IS eerily quiet on the corporate front. Even though the global economy continues to grow strongly, and the economic recovery is nearly a year old even in America, corporate investment, and mergers and acquisitions, remain at low levels even though firms are sitting on record piles of cash.
This, in turn, is causing growing concern about whether the recovery can continue, or at least continue with much strength. As The Economist noted earlier this month, “If cautious firms pile up more savings, the prospects for recovery are poor.”
Why are firms so cautious? One likely factor is that they regard the outlook for the economy as highly uncertain, particularly in America and Europe. The recent combination of volatility and a declining trend in developed-world stockmarkets has reinforced concerns that already abounded in companies’ executive suites, that the recovery so far has relied too much on government spending. That, given all the recent political talk about the need for public austerity to fend off bond-market vigilantes, may not continue. Meanwhile, private-sector demand remains anaemic.
A second factor is that firms have much less need to invest now because their capacity utilisation remains at historically low levels, points out Carsten Stendevad of Citigroup’s Financial Strategy Group. Currently, for example, industrial-capacity utilisation in America is 73%. That is up from the recessionary low of 69%, but well below the 80%-plus level it was at in the years before the economic meltdown in September 2008, and during much of the 1990s. Since plants still have so much spare capacity, managers see little justification for capital spending. Citigroup forecasts that in developed countries, industry’s capital spending will fall by 3% this year after a 10% fall last year. In emerging markets, capex is expected to grow by 8% this year—not a bad rate, but far short of last year’s roaring 21% growth.