Economic Forecasts

Business Spending: Growing Despite Chip Shortages

Kiplinger’s latest forecast on business equipment spending

Kiplinger's Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or for more information.

If you already subscribe to the print edition of the Letter, click here to add e-mail delivery and the digital edition at no extra cost.

Expect 12% growth in business capital spending this year, compared with a 0.3% decline last year. New orders will rise a similar amount. CEO confidence is at its highest level in 45 years, according to the Conference Board. Purchases of machinery are robust. Businesses are responding to rising demand by implementing expansion plans.

But semiconductor shortages are limiting the sales of electronics, motor vehicles and communications equipment. Worldwide chip production capacity is expanding—good for sales of semiconductor manufacturing equipment—but the shortage will likely persist through year-end. The auto industry will suffer the longest, as it uses older semiconductors, and only a few new manufacturing facilities will be built for these. But the industry’s needs will most likely be met by sometime in 2022.

In the meantime, manufacturers—even those dealing with supply chain disruptions—continue to purchase machine tools and other equipment, so that they will be ready to ramp up production when they can.  Likely beneficiaries of the spending binge include makers of industrial robots and 3D printers. Workers are in short supply in manufacturing. Robots can help, and they also reduce the need for social distancing among workers. 37% of U.S. assembly plants plan to invest in 3D printers, a record high. Interest is also high in collaborative robots, which work in close contact with humans instead of as stand-alone ‘bots. 31% of assemblers are currently using the technology or plan to within the next year, and 17% more plan to within two to three years.

A boost for purchases of oilfield equipment seems likely, as the price of West Texas Intermediate crude oil appears to have stabilized at over $70 per barrel, its highest in more than six years. The number of active drilling rigs has been on a steady upward path since the beginning of October, but is still 300 rigs short of what was operating before the pandemic.

Sources:

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
How to Calculate the Break-Even Age for Taking Social Security
social security

How to Calculate the Break-Even Age for Taking Social Security

When it comes to maximizing your Social Security benefits, there are many elements to consider. One factor that can be especially enlightening is your…
August 30, 2021
Spend Without Worry in Retirement
Financial Planning

Spend Without Worry in Retirement

Fears of running out of money prevent many retirees from tapping the nest egg they’ve worked a lifetime to save. With these strategies, you can genera…
August 30, 2021

Recommended

Child Tax Credit Payment Schedule for the Rest of 2021
Tax Breaks

Child Tax Credit Payment Schedule for the Rest of 2021

The IRS has already sent three batches of monthly child tax credit payments. Here's when you can expect the rest of your payments.
September 16, 2021
Kiplinger's Economic Outlooks
Economic Forecasts

Kiplinger's Economic Outlooks

Regularly updated insights on the economy’s next moves.
September 16, 2021
COVID-19 Home Test Kits and PPE are Tax Deductible
Tax Breaks

COVID-19 Home Test Kits and PPE are Tax Deductible

You can also pay for home testing kits and personal protective equipment with FSA and HSA funds.
September 11, 2021
How the Pandemic Is Reshaping Retirement
Making Your Money Last

How the Pandemic Is Reshaping Retirement

Inflation tops health care costs as the biggest concern, and many preretirees are boosting their saving rate.
September 8, 2021