How Credible are Capital Spending Surveys as Forecasts?

Business analysts should be aware that the survey of capital spending plans published by the U.S. Department of Commerce has several limitations as a forecast of quarterly and annual fixed investment. Although the annual expectations are relatively reliable, the quarterly spending projections are often less accurate than other inexpensive and equally accessible forecasts. This Economic Commentary compares the reliability of the Commerce Department survey with that of several alternative forecasts, and suggests some underlying reasons for the discrepancies between the survey’s projections and actual capital expenditures.