Investment spending in the world’s largest economies has stalled, as supply-chain disruptions and uncertainty over the durability of the current economic boom hold back spending, a trend that could further exacerbate already high inflation.

Businesses around the world report shortages of goods that are in high demand, and consumer prices have risen sharply over recent months. While economists expect companies would have sunk money into expanding capacity, investment spending in many of the world’s largest economies has instead stalled.

Investment spending had by midyear bounced back from the sharp economic contraction seen in the early months of the pandemic, but there were widespread declines in the three months through September, the most recent period for which internationally comparable figures are available.

According to figures compiled by the OECD, investment spending fell in the U.S., Canada, Japan, Germany, South Korea, the Netherlands and Switzerland during the third quarter. Taking the Group of Seven largest rich economies together, investment spending fell by 0.8% from the second quarter. Moreover, national figures that aren’t adjusted for seasonal variations also point to a decline in China, the world’s factory powerhouse.

Warehouses in California’s Inland Empire are a crucial step in the U.S. supply chain. Low warehouse vacancy rates in the area combined with port delays are creating a perfect storm of challenges this holiday season. Photo: Sam Rosenthal

Investment spending in the U.S. has rebounded from its collapse in spring 2020 and now slightly exceeds pre-pandemic levels. But in the third quarter of this year it fell slightly.

That suggests businesses held back on investment just as shortages were contributing to a sharp rise in consumer prices, a sign that it will likely take many months to expand global factory capacity to match the pandemic surge in demand for goods.

A rapid rise in demand for consumer goods—from laptops to bikes to toys—has exceeded the global capacity to make such products, pushing up inflation and snarling supply chains that are straining to make and deliver them to shoppers.

While many economists expect demand for those goods to ease once it becomes safer to use services such as entertainment, travel and hospitality, they have also expected businesses to expand their capacity to make those products by boosting their investment spending.

The causes of the slowdown appear mixed. Many businesses cite price rises, supply-chain problems and uncertainty as to how long the surge in consumer spending will last. Strong demand for goods might persist if the changes in spending habits prompted by the pandemic endure—or it could prove transitory if consumers revert to their pre-pandemic behavior.

In China’s southeastern city of Wenzhou, Zhu Chaohu who leads an auto-parts company said he isn’t eager to invest in new factories or hire more workers, even though revenue has grown by about 25% so far this year from a year ago.

“We simply can’t tell how much longer the strong demand will last,” said Mr. Zhu, CEO of Zhejiang Tengxiang Auto Parts Ltd.

His company mainly sells ignition switches and has about 100 workers. Another reason behind the company’s cautious approach: elevated raw materials costs from copper to steel have squeezed its profit margin by more than 3 percentage points this year.

Factory and residential compounds in Wenzhou, China.


noel celis/Agence France-Presse/Getty Images

Like many other suppliers of car components in the areas, Mr. Zhu said he would add capacity “passively,” or only when the company receives new orders, instead of making projections now. That means they’ll likely buy some new equipment and hire more temporary workers instead of building new factories from scratch.

That combination of high sales and sluggish investment is also common outside China. According to BNP Paribas, capital expenditure by businesses included in the U.S. Standard & Poor’s 500 index during the third quarter was at its lowest level relative to sales since 2010.

The weakness in capital expenditure came at a time when consumer spending was strong, which is usually a spur to businesses to spend more on expanding capacity. In the eurozone, for example, consumer spending rose by 4.1% in the three months through September, but investment spending fell by 0.9%.

Even where there is uncertainty, some businesses want to invest, but face challenges because of strained supply lines and surging costs.

This year, exports of Italian wine are set to exceed their pre-pandemic levels in 2019. But the country’s wine growers aren’t using those extra revenues to invest.

Matilde Poggi, a winegrower based in Cavaion Veronese, in northern Italy, says that many of the country’s vineyard owners just can’t expand because they are struggling to get their hands on needed equipment and materials.

Their everyday costs are also rising, as prices for cardboard packing increase by as much as 13%, metal bottle caps become dearer and energy suppliers warn of up to a 30% increase in gas and electricity bills, said Ms. Poggi, who is also the president of the European Confederation of Independent Winegrowers.

“People don’t want to spend money now,” she said.

Ms. Poggi started building a new warehouse for her own operation in July and wishes she could have postponed. Current supply-chain problems and general inflation mean she will be paying some 30% more than she once thought.

These price rises will all feed into the consumer.  At a recent meeting of her trade body, board members polled said there would be a 3% to 5% rise in the price of a bottle, with some saying up to 10%, said Ms. Poggi.

Demand for the tungsten, a resource used in satellites and semiconductors,  is soaring, pushing the price up 39% from the start of the year to mid November, according to

Almonty Industries Inc.,

a Toronto-listed miner with operations in South Korea, Portugal and Spain.

But the cost of the equipment, steel rods, fuel and other inputs needed to take it out of the ground is also rising. Chief Executive

Lewis Black

also fears labor unions will ask for pay rises next year; unions in Portugal are already asking for a 14% price increase, he said.

All that has forced the company to idle half its world-wide production. It is investing in a new South Korea mine, but has decided not to sink the $43 million it would take to restart mines in Spain that it closed last year due to Covid-19.

“There is demand for raw materials, but the operating costs of mines are now starting to increase quite dramatically,” he said. “We are caught between a rock and a hard place.”

Shoppers queued outside a store on Black Friday in Florida this year.


Paul Hennessy/Zuma Press

A shortage of workers with the right skills may also have been holding back investment, according to a survey conducted by the European Investment Bank during the summer. The EIB asked 30,000 businesses in Europe and the U.S. to identify the main obstacles they face in implementing their investment plans, and around four-fifths cited staff shortages.

Despite the problems facing businesses, economists continued to expect to see a pickup in investment over the coming year, driven by the opportunity to make higher profits by expanding capacity. But it is unlikely to be a smooth and straightforward process, given the twists and turns of the pandemic, including the spread of the new Omicron variant.

“There is uncertainty and it continues to weigh on firms,” said Debora Revoltella, chief economist at the EIB. “This is even more clear at the moment when a new wave of the pandemic comes up.”

Write to Paul Hannon at, Stella Yifan Xie at and Alistair MacDonald at

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