North American Project Spending Drop for September Less Severe than Past Months

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Researched by Industrial Info Resources (Sugar Land, Texas)--On the face of it, the latest overall numbers in Industrial Info's North American Industrial Project Spending Index don't look that good.

The spending index measures the value of all active projects in the pipeline for the year on a monthly basis. For September, the index totaled $322.84 billion, down 10.4% from $360.3 billion reported in September 2019, as spending maintained a year-over-year slide that began in February. Industries continue to struggle with the economic plunge and the effects of the COVID-19 pandemic.

On the other hand, year-over-year spending last month was up in six of the 12 industries tracked by Industrial Info, the most since February, when increases were noted in eight of the industries. Also, the 10.4% drop in spending (-$37.46 billion) last month was the least since February, when a 3.92% decrease (-$26.25 billion) was reported.

In other words, the drop in overall project spending wasn't as bad as it has been in past months. In May, for example, spending was down 30.53%, or $174.21 billion, in comparison with spending in May 2019.

Click on the image at right for a graph showing the year-over-year spending changes since the start of 2020.

Year-over-year project spending increases were reported in the Power, Oil & Gas Pipelines, Alternative Fuels, Food & Beverage, Industrial Manufacturing and Pharmaceutical & Biotech industries. On a percentage basis, these ranged from 0.46% ($10 million) for Oil & Gas Pipelines to 41.18% for Alternative Fuels. On a sheer dollar basis, Industrial Manufacturing had the biggest increase at $9.49 billion.

The Institute of Supply Management (ISM), which follows 18 industry sectors, said economic activity in the manufacturing sector grew in September, marking the fifth consecutive month of growth. The ISM's Purchasing Managers Index (PMI) for September registered 55.4%, down 0.6 percentage point from the August reading, but still indicative of an expansion.

Also, respondents to a third-quarter U.S. manufacturers' survey indicated they expect capital spending to rise 0.7% over the next 12 months. For more information, see October 2, 2020, article - Survey: Manufacturers Shift Capital Spending Outlook into Positive Territory.

Whether the drop in spending will continue to abate in future months remains to be seen. However, COVID-19 cases appear to be on an upswing, which could have an impact on project development.

The North American Spending Gap Index, which measures the amount of fallout from projects that have been cancelled, placed on hold or moved to another year, widened by 16.51% to $390.5 billion in September from $335.3 billion a year earlier. The spending gap increased in all but four of the 12 industries tracked by Industrial Info.

Also, Industrial Info's August North American Construction Starts Index, which measures the amount of project activity that has been funded and started construction for the year, amounted to $173.2 billion in September, down 30.4% from September 2019. Total investment values fell in all but two industries.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.