USD strength likely to weigh on investment structure in near future

US business investment remains the primary disappointment of the recovery. 

This was again the case in Q3. After a 25% post-recession surge over the 15 months to June 2012 and a likely energyinduced 13% swoon over the year to March 2014, non-residential construction activity has since been flat, the declining price of oil arguably a key impediment. 

"Remaining spare capacity and the strength of the US dollar are likely to keep pressure on structures investment for the foreseeable future. Equipment investment by US firms has also been very disappointing in 2015", says Westpac. 

Despite a 5.3% annualised gain in Q3, growth over the past year stands at just 0.7%yr. That is down from a (brief) peak of 10.2%yr a year ago. As for construction, the oil price and strong US dollar have been key factors behind this weak trend. 

Yet they are not the sole contributors. Since the beginning of 2011, annualised growth in equipment investment has averaged 6.7%. This is only marginally above the pace we see as necessary for the maintenance of the capital stock, let alone its expansion.