Economic Forecasts

Business Spending: Staying Strong Despite Chip Shortages

Kiplinger’s latest forecast on business equipment spending

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Capital equipment spending is having a banner year. Expect 12% growth 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, as are computer sales. However, sales of electronics, motor vehicles and communications equipment are being slowed by the shortage of semiconductors. Businesses are responding to rising demand by implementing expansion plans, though large firms are more enthusiastic than small firms at this time.

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 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% 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 $60 per barrel, its highest in more than two years. The number of active drilling rigs has been on a steady upward path since the beginning of October.

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