Capital Expenditures See Significant Growth
In the second quarter of this year, equipment and capital expenditures (CapEx) rose by 11%, building on a 23% increase from the first quarter. According to Treasury Secretary Scott Bessent, this marks the strongest consecutive quarterly growth since 1997. CapEx, in essence, encompasses the investments that businesses make to secure or maintain long-term assets.
Joe Lavorgna, Counselor to Secretary Bessent, indicated that the substantial rise in CapEx is primarily driven by the One Big Beautiful Bill (OBBB).
“It’s a function of the One Big Beautiful Bill, which was retroactive to inauguration day,” Lavorgna mentioned. “Companies anticipating its passage started investing in their business. We saw that continue in quarter two, and now you’ve got a great setup for the rest of the year and beyond because the bill now is actually legislated.”
Lavorgna believes this surge in investment will directly lead to increased productivity and improved wages for American workers.
“It all started with the CapEx, tied to the One Big Beautiful Bill,” he stated. “Now that this bill is law, we expect the CapEx or investment story broadly defined to accelerate, deepen, and strengthen. Ultimately, that translates to faster productivity, better living standards, and crucially, bigger take-home paychecks for the average American.”
A notable incentive in the bill permits businesses to write off manufacturing facilities as physical structures. This could potentially help in curbing inflation by increasing supply.
“Consider how much more efficiently a business can operate if it’s motivated to acquire new equipment,” Lavorgna added. “And notably, the bill allows for expensing plants like physical structures, something that wasn’t included in the original bill.”
“This innovative aspect of the bill,” he continued, “will help spark a reindustrialization and a manufacturing renaissance, or as the president puts it, a golden age for U.S. manufacturing. Manufacturing jobs typically offer higher than average wages.”
Lavorgna stressed that this spike in CapEx is likely just the beginning, especially since the OBBB only became effective three weeks ago.
“This benefits companies that already chose to invest, but now the assurance of a stable environment allows for expanded planning,” he said. “There’s no looming fear of significant tax hikes in 2026. You can hire more rapidly, which is all positive news and aligns with what we anticipated.”
“The Secretary (Bessent) worked closely with Leader Thune and Speaker Johnson to finalize this,” Lavorgna noted. “However, the foundation lies in President Trump’s vision as a builder, understanding what it will take to create real value. I believe this bill is already yielding benefits, and I’m optimistic about even better numbers in the future.”
