Decline of the U.S. capital stock, Not Seen in 60 Years

http://www.businessinsider.com/ubs-capital-stock-us-economic-decline-2012-8

Matus told Bloomberg TV that the decline of the U.S. capital stock is a bad sign:

I would say that one of the things that people have generally ignored is that the U.S. capital stock is in decline. This is the first time post-war we've ever seen it. We don't know what the repercussions are because we have nothing in history to look back on and say, "Hey, last time it did this, this is what followed on it."

The capital stock Matus is referring to is American companies' investments in new equipment and software – one of the four main components in GDP – less the depreciation of existing equipment.

The implication of a drop in the capital stock is that potential growth is much lower than it could be if businesses were investing more in new capital. As a result, economy-wide return on assets can be expected to be much lower, UBS economist Sam Coffin told Business Insider.

It's more of a longer-term story. What it suggests is that productivity growth going forward isn't as likely to be as great because we haven't made as much capital investment as we otherwise would have.

It's sort of a symptom of the slow growth we've seen – except that there have been periods of slow growth in the past when we've seen more capital stock increase. But more importantly, it's just a lack of deepening of the capital stock that suggests lower trend growth ahead unless we work on it.

It's still going along at a pretty slow pace, and probably not enough to make up for the depreciation of the existing capital stock. It's on track for another very soft year in 2012.