Long Term Perspective
Cash flow is to business investment what income is to consumption expenditures. For a long time - between 1996 and 1999 - business fixed investment grew more rapidly than cash flow. The imbalance couldn't continue forever. Cash flow improved in 1999 and part of 2000 so that the growth of these two series were in better alignment. By the end of 2000, cash flow dropped more than business fixed investment once again suggesting that business fixed investment would weaken - and it did. Cash flow improved in 2001 and early 2002 suggesting an improved outlook for business fixed investment in coming quarters.

Short Term Perspective
Business fixed investment fell again in the third quarter relative to a year ago. The bulk of the weakness stems from a plunge in nonresidential investment spending - equipment and software sales were up in the third quarter for the second quarter in a row. On a year-over-year basis, cash flow rose more slowly in the third quarter than in the previous two quarters. Nevertheless, rising cash flow bodes well for capital spending down the road.

Real GDP vs. Final Sales   •   Real Consumer Spending vs. Real Income   •   Debt Burden vs. Savings Rate

Business Fixed Investment vs. Net Cash Flow   •   New Orders   •   Housing Starts vs. Mortgage Rates

Merchandise Exports vs. Trade Weighted Dollar   •   Merchandise Imports vs. Trade Weighted Dollar