I am writing a piece on the Electro-Motive dispute in Canada and needed data on equipment and machinery. I had forgotten which CANSIM series I was looking for and asked if anyone knew. Reader Chris Hylarides pointed me towards a piece written by... Stephen Gordon. Not only did Stephen's piece have the data I was looking for, it answered the questions I was looking to ask! However, his piece was from early 2006. How have things changed since then?
If high profits weren't leading to higher levels of fixed business investment, that would definitely be a cause for concern - although not necessarily a reason for increasing corporate tax rates. But is it in fact the case? The reference to 'corporate capital spending' bothers me: I've never heard of a data series with that name, and a search of CANSIM (Statistics Canada's main source of economic data) leaves me no wiser as to what he meant.
Here's what I did find*. First, there's little reason to claim that increases in profits aren't being matched by corresponding increases in investment:
Stephen's chart extended from 1991 to 2006. Here is the same chart, from 1991 up to the 3rd quarter of 2011:
Profits and Expenditures on Machinery and Equipment
Investments in machinery and equipment are still going strong. In Stephen's second graph he concluded "as a proportion of GDP, expenditures on machinery and equipment are at a 45-year high". Here is the same data, starting from 1961 and going up to Q3 2011.
Private Expenditures on Machinery and Equipment as a % of GDP