$1.5 trillion US tax cut failed to boost business investment, hiring plans: Survey

$1.5 trillion US tax cut failed to boost business investment, hiring plans: Survey $1.5 trillion US tax cut failed to boost business investment, hiring plans: Survey

The $1.5 trillion tax cut package approved by the administration of US President Donald Trump appeared to have no major impact on capital investment or hiring plans by American companies, according to a survey.

The National Association of Business Economics’ (NABE) quarterly business conditions poll published on Monday was released a year after the biggest overhaul of the US tax code in more than 30 years.

The survey found that while some companies reported accelerating investments because of lower corporate taxes, 84 percent of respondents said they had not changed plans. That compares to 81 percent in the previous survey published in October.

The Trump administration had predicted that the massive fiscal stimulus package, which came into effect in January 2018 and reduced the corporate tax rate from 35 percent to 21 percent, would boost business spending and employment.

“A large majority of respondents, 84 percent, indicate that one year after its passage, the corporate tax reform has not caused their firms to change hiring or investment plans,” said NABE President Kevin Swift.

The NABE survey also suggested a further slowdown in business spending after moderating sharply in the third quarter of 2018. The survey’s measure of capital spending fell in January to its lowest level since July 2017. Expectations for capital spending for the next three months also weakened.

“Fewer firms increased capital spending compared to the October survey responses, but the cutback appeared to be concentrated more in structures than in information and communication technology investments,” said Swift, who is also chief economist at the American Chemistry Council.

The lower tax rates, however, had an impact in the manufacturing sector, with 50 percent of respondents from that sector reporting increased investments at their companies, and 20 percent saying they redirected hiring and investments to the United States from overseas.

The risk of an economic recession in the United States has grown to the highest level in seven years, according to a survey by economists released in January.

There is now a 25 percent chance of a recession within the next 12 months, the highest level since October 2011 and up from just 13 percent last year, a monthly poll of economists conducted by The Wall Street Journal found.

The growing risk of a recession came from a slew of worries including US trade tensions with China, rising interest rates and the sharp stock market selloff, the survey revealed.

A survey by Reuters in December indicates that the risk of a US recession in the next two years has risen to 40 percent.

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