Please enable JavaScript to view the comments powered by Disqus.

Economic Forecasts

Business Investment to Show Modest Comeback

Kiplinger's latest forecast on business equipment spending

iStockphoto

GDP 2.1% pace in '17, 2.4% in '18 More »
Jobs Hiring pace should slow to 175K/month by end '17 More »
Interest rates 10-year T-notes at 2.4% by end '17 More »
Inflation 1.4% in '17, down from 2.1% in '16 More »
Business spending Rising 3%-4% in '17, after flat '16 More »
Energy Crude trading from $40 to $45 per barrel in December More »
Housing Existing-home sales up 3.5% in '17 More »
Retail sales Growing 3.5% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, after nearly flat '16 More »

Firming global growth and a strong domestic housing market hold the promise of modest improvement for U.S. manufacturing and investment this year. Prospects aren’t quite as bright as they were at the start of 2017, when it seemed that the incoming Trump administration might quickly fire up a promised infrastructure spending boom. Nonetheless, the manufacturing sector continues to gradually strengthen after a two-year soft patch in 2015 and 2016.

via e-mail: Kiplinger Alerts — Intelligence for your business success

2017 remains on track for a 3%-4% pickup in business investment, well below the double-digit gains seen a decade ago, but a sign of healing for the industrial sector. In the longer term, a faster-paced recovery is still possible if and when the White House and Congress can agree on a plan for boosting spending on the nation’s roads, airports and other infrastructure projects. Meanwhile, there has been progress on reducing regulations that businesses find onerous, and the administration is pursuing a Made in America drive to return more factory production to the United States.

Increasing energy production within U.S. borders, rather than importing oil, also is a boon to manufacturing. The number of oil and gas drilling rigs at work has roughly doubled in the past year to 950, and the companies that engage in exploration and development are big customers for specialized equipment ranging from pumps, valves and drilling gear to the pipeline needed to move energy products around the country. U.S.-based companies are known globally for their oil drilling equipment and technological expertise and they – like other industries that sell abroad – are in a better position now that the U.S. dollar is declining in value against other major currencies after a long run of appreciation.

Orders overall for costly, long-lasting durable goods surged during June, though most of it came from a big jump in aircraft business for Boeing Co. But even after discounting the facts that airplane orders typically come in batches and that June’s orders were more than twice those recorded in May, other details of the monthly orders and shipments report were solid. Orders for machinery as well as for both primary and fabricated metals strengthened from May. Only electrical equipment and computers posted fewer bookings during June. Excluding defense and aircraft business, there was a slight 0.1% decline in orders during June, though that came after an upwardly revised 0.7% gain in May. But shipments of finished goods grew by 0.2% in June, which also followed an upward revision showing 0.4% growth for May’s shipments.

Advertisement

The slight drop in June for non-defense-related goods excluding aircraft bears watching, since it resulted in a modest buildup in inventories. But there is no sign of acceleration in stocks of unsold goods relative to shipments, which bodes well for business investment during the remainder of 2017.

See Also: Small-Business Success Story: Spicing Up an American Classic


Sources: