Manufacturer Survey: Slowest Capex Growth Expected Since 2020

Researched by Industrial Info Resources (Sugar Land, Texas)--The National Association of Manufacturers' (NAM) latest quarterly membership survey shows respondents expect capital spending to rise only 2.2% over the next 12 months, down from 2.6% in the previous survey, and the lowest since the fourth quarter of 2020.

According to the survey results, which were released on Monday, 45.6% expect additional capital spending in the next year, with 40.3% predicting no change and 14.1% forecasting reduced capital expenditures.

Industrial Info is tracking nearly 1,200 Industrial Manufacturing projects, worth $238 billion, that are under construction in the U.S. By sector, transportation systems, which feature costly infrastructure projects, take the lead in total investment value, followed by semiconductors and computers. Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can click here for a list of detailed project reports.

Click on the image at right for a chart showing Industrial Manufacturing projects under construction, by sector.

The results from the NAM survey, which was conducted August 16-30 with 365 responses, show the weakest results since the fourth quarter of 2020, according to the trade group.

"Indeed, sentiment was just marginally above the historical average, which was 75.2%, illustrating just how much manufacturing activity has stalled year to date," NAM said.

Still, the results show "both promising indicators and some warning signs," the report said. "On the one hand, manufacturers have proven resilient amid an onslaught of challenges, including supply-chain issues, economic and geopolitical uncertainties, workforce shortages and soaring costs. Yet, on the other hand, manufacturers are not immune to the weakening of the global economy, and nearly all of the sentiment surveys show activity at two-year lows."

Supply-chain challenges topped the list of concerns, according to the survey, with only 10.8% of the respondents anticipating any improvement before the end of 2022.

"As such, more respondents expect supply-chain issues to drag on longer than in the previous surveys," according to the survey.

"Three out of four manufacturers still have a positive outlook for their businesses, but optimism has certainly declined," said NAM President and Chief Executive Officer Jay Timmons in a press release. "The majority of respondents are expecting a recession this year or next, and it's clear the challenging environment is taking its toll. Manufacturers have shown incredible resilience through multiple crises, but the challenges of inflation, supply-chain strains and the workforce shortage are taking a toll."

David Pickering, Industrial Info's vice president of research for the Industrial Manufacturing Industry, said he was "not particularly surprised" by the survey results.

"The surge in semiconductor spending has topped out with all the massive projects announced, so a slowdown was inevitable," Pickering said. "The auto sector has been ramping up spending aimed at the conversion to EV (electric vehicles) in the coming years, but that also takes time."

He continued, "With the recession and slowing economy, topped by the supply-chain issues that we cannot seem to get rid of globally, spending was going to slow a bit. We may see the slowdown in spending continue well into 2023 as everyone tries to right the ship and the (U.S. Federal Reserve) tries to get a handle on the inflation issue."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).