There are (at least) two reasons to believe that investment will remain more buoyant than many believe. First, the demand for housing will remain relatively steady as the elderly stay in their houses and new households create demand for new construction. Second, the corporate sector is likely to invest in capital in a way that raises the capital-labour ratio, in order to boost productivity. In net terms, we believe savings are likely to fall by more than investment, lowering the real interest rate.
