Economic Forecasts

Business Spending: Firms Are Still on a Shopping Spree

Kiplinger’s latest forecast on business equipment spending

Capital spending is still on a roll, rising 0.5% in November and 6% over the past 12 months. Spending is now 5.2% above its prepandemic level, and new orders are 6.4% higher. Computer and communications equipment spending is hot, evidence that many companies continue to equip their workforces for remote work. Machinery spending and orders are strong. Even though many uncertainties about the economy’s progress remain, businesses are apparently deciding to push ahead with expansion plans that had been on hold, in order to be prepared for the eventual recovery. However, surveys indicate that large firms are more enthusiastic than small firms at this time.

Likely beneficiaries include makers of industrial robots and 3D printers. Robotics removes the need for worries about physical distancing of the workforce. 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-alones. 31 percent of assemblers are currently using the technology or plan to within the next year, and 17 percent within two to three years.

A boost for purchases of oilfield equipment seems likely, now that the price of West Texas Intermediate crude oil has surpassed $50 per barrel, its highest level since early March. The number of active drilling rigs has been on a steady upward path since the beginning of October.

Orders and production of aircraft will likely improve, now that the 737 Max has been approved for service again. Boeing’s shipments this year are only a third of last year’s, which in turn was 47% below its deliveries in 2018, before the 2019 737 Max crashes halted its production for a time.

Sources:

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