is spending on capital goods by firms and
government, which will allow increased production of consumer goods and
services in future time periods. Be careful not to confuse the economist's
definition of investment with another interpretation - that investment
involves putting funds into financial assets such as stocks and shares.
chart below shows the annual percentage change in capital investment spending
in the British economy since 1975. You can see that investment demand is
quite volatile from year to year. Indeed in years of economic recession, the
real value of investment spending can fall quite sharply because businesses
decide to postpone or cancel investment projects.
spending across the UK economy has increased (in real terms) in each of the
last eight years partly because the economy as a whole has enjoyed a period
of sustained economic growth. Service industries have enjoyed the lion's
share of this spending on capital goods, but we have also seen large scale
increases in capital expenditure in new economy sectors such as information
technology and communication industries.