EconSouth (Fourth Quarter 2000)
Living in an 800 MHz Economy
omputers are a big deal. To be convinced, just think about how much money U.S. businesses spend on them. Through the first nine months of 2000, the Bureau of Economic Analysis estimated that, out of the approximately $780 billion spent by U.S. businesses on all types of equipment, over one-third was devoted to computer and software purchases.
Moreover, the share of equipment expenditures going toward computing power has increased during the past decade. Since 1992, annual expenditure growth on general industrial machinery averaged 7 percent. In contrast, dollar expenditures on computer hardware increased at an average annual rate of 12 percent between 1992 and 1999 and by over 20 percent during 2000. At the same time, outlays on computer software increased at an average pace of 10 percent from 1992 to 1996 and at over 20 percent annually since that time. While much of the ramp up in software expenditures in the late 1990s was related to Y2K preparation, Y2K investments in many cases also provided firms with an opportunity to improve upon outdated technologies. Interestingly, growth in both computer and software spending for 2000 remained strong.
Better, faster, stronger
How recent experience is different
On the horizon in 2001
If these price trends continue in 2001, they could erode real investment growth unless businesses allow nominal outlays to increase even more rapidly. The most likely scenario is that expenditures on computer-related equipment and software will continue to be strong in 2001 even if growing at a slightly slower pace than in 2000 as firms continue to seek ways to increase productivity and control costs.
By John C. Robertson, assistant vice president of regional research of the