/Economic Preview: One engine of the U.S. economy is revved up, but another is stalling

Economic Preview: One engine of the U.S. economy is revved up, but another is stalling

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Businesses have been stymied by the trade war with China.

The U.S. economy is in a weird spot. One key engine of growth is all revved up, but another is stalling.

Americans are still spending plenty of money and remain fairly confident in the economy, even as the companies that employ them tighten their belts.

Read: Strong consumer spending offset in the third quarter by weak business investment

The divide between consumers and businesses has been on display all year. Consumer spending soared in the spring and summer and is likely to close out the year on a healthy note.

Read: Consumer spending climbs in November at fastest pace in four months

Business investment, on the other hand, began to tumble early in 2019 and it’s only gotten worse.

A key measure of investment, known as core capital goods orders, fell 1% in the 12 months ended in November after increasing at a 4% yearly rate when 2019 began.

Don’t expect a big turnabout when the latest business investment figures are released a few days before Christmas.

See: MarketWatch Economic Calendar

Orders for durable goods are likely to show some pop in November after the end of the a month-long strike at General Motors

GM, -0.03%.

Business investment might also be positive, but the trend is still very weak.

The manufacturing sector, for instance, has been contracting since the end of summer. Most companies have scaled back hiring. And many firms are still waiting to see how the U.S. trade policy fight with China plays out before proceeding with big investment projects.

“U.S. business Investment has been soft in part due to heightened uncertainty due to the trade war and global growth concerns,” noted chief economist Scott Anderson of Bank of the West.

What companies have not done though is lay off more workers. And that’s been a huge cushion for the U.S. economy.

Read: Jobless claims fall back in mid-December after spiking to a more than two-year high

So long as workers — also known as consumers — keep spending, companies will retain them as employees. And as long as that’s the case, workers confident in their job security will keep spending enough and give businesses no reason to let them go.

Just don’t expect the economy to grow much faster than it already is — about 2% a year.

Although consumers are the main engine of economic growth, businesses have to spend and invest more to push the economy to greater heights. The “business of America is business,” as President Calvin Coolidge once said.

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