Notes: Gray bars denote National Bureau of Economic Research (NBER)-defined recessions at a quarterly frequency. All values taken as a year-over-year percentage point change for the four-quarter rolling average.
Sources: Bloomberg, U.S. Bureau of Economic Analysis (Haver Analytics), NBER (Haver Analytics), and authors’ calculations.
Higher interest rates and tighter financial conditions tend to slow firms’ growth and reduce mergers and acquisitions (M&A) activity. M&A deal activity (blue line) complements business fixed investments and tends to lead changes in spending on equipment (green line) and structures (orange line). The sharp decline in M&A deals in late 2022 and throughout 2023 may be a reversal of the sharp rise in M&A activity in the second half of 2021 but could also portend a decline in capital investment in the coming quarters. To learn more, see Rodziewicz and Sly (2019).
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