CapEx Slowdown May Signal Slowing Construction Sector

CapEx is short for capital expenditure. It represents money that businesses use to purchase or upgrade physical assets, such as property, plants, equipment, etc. Why is this important? Well, a recent article has stated that CapEx investment in the U.S. is on the decline. This trend started in the energy industry (e.g. the oil extraction and processing), but is spreading outward. When companies allocate less funds for CapEx, that means construction activity decreases. Think about it: every time Amazon allocates money for a new distribution center or Google for a new R&D center, physical buildings (and the associated infrastructure) usually needs to be constructed. CapEx goes to more than just construction projects, but a lot of assets bought with CapEx budgets need to be constructed. This could be another clue that the construction industry is headed for a slowdown in the near term.