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Don't write off the recovery in business investment

The sharp drop in machinery orders in April and May casts doubts on the prospects for capital spending. However, we are not too worried. Business investment was exceptionally strong in Q1, so a fall in the second quarter had always been likely. Spare capacity has diminished, and firms remain optimistic about future demand. As a result, the recovery in capital expenditure should resume in the second half of the year.

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