the "yeah, but" economy

There's an old vaudeville skit in which two characters refuse to go through a door until the other has passed through:

"After you," says the first.

"No, please, after you," says the second.

"Really, I insist," says the first, gesturing toward the door.

And so on. Needless to say neither one ever gets to the other side.

Sometimes, the way things have played out in this economy reminds me of that. We've been hearing for a long time now about all the pent-up demand for business investment, yet the deluge hasn't amounted to more than a trickle. With interest rates at historic lows, the Fed is nearly out of options for stimulating the economy. And with federal deficits soaring, what the Fed giveth, borrowing by the government may soon taketh away. You can't keep borrowing billions without pushing interest rates up.

In the meantime, we've noticed a marked reluctance to invest in new facilities or equipment despite respectable profits in many industries. That's understandable. Capacity utilization has hovered in the mid-70th percentile, a bit low for spurring new investment. Unemployment refuses to budge from the 6-percent level, and job creation has lagged behind expectations.

While people we've talked to at recent trade conferences have voiced cautious optimism,no one wants to be the first through the door - and that universal timidity seems to sap the recovery's energy. It just doesn't feel like a recovery yet.

Reinforcing the impression that we're in what we might call a " yeah, but" economy was a recent forecast by the National Association of Business Economists that projected that corporate profits would rise by 9.6 percent this year, but that new plant and equipment investments would inch up a paltry 1.4 percent.A little closer to home,the Material Handling Industry of America is forecasting that new orders for material handling equipment will grow by 7 to 9 percent this year. Sounds good, but you have to put it in perspective: Orders declined 8.2 percent in 2001 and 11.0 percent last year, so while it's good news for those manufacturers, it's not exactly a profit rocket, either.

Is the glass half empty or half full, then? I guess the best answer is, "yes."