Update on Capital Spending

Posted by: Michael Mandel on May 01

In a recent article, I reported that capital spending by U.S-based corporations was up 18.1% in the fourth quarter of 2006 (year over year), compared to the 8.9% increase in nonresidential investment in the GDP accounts. I attributed the difference to spending outside the U.S., which is not picked up in the domestic investment figures.

I’ve just done an initial calculation for the first quarter of 2007, based on roughly 100 large companies that have reported capital spending, including such biggies as GE, IBM, Verizon, ExxonMobil, and AT&T (adjusted for the merger with BellSouth).

Here are the results (percentage year over year increase, 1Q07)

Global capital spending of U.S-based large corporations

= 9.3% increase*

Domestic capital spending of all businesses in U.S.

= 5.5% increase

A big part of the slowdown comes from ExxonMobil, which reduced its global capital and exploration budget by 11% compared to a year earlier.

*These figures will obviously change as more companies report. This initial sample includes S&P 500 companies with 1st quarter capital spending data on the Compustat data disk as of 4/25/07, plus companies in the Dow Jones index that had reported 1st quarter capital spending as of the morning of May 1.


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Reader Comments

Ken

May 5, 2007 02:30 PM

I've seen similar figures for Japan, which has obviously had a boom in capital spending over the past 18 months. Much of the actual spending happens offshore, though just how much is still apparently a matter of speculation...

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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