Survey: Manufacturers Shift Capital Spending Outlook into Positive Territory

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Researched by Industrial Info Resources (Sugar Land, Texas)--Respondents to a recent third-quarter U.S. manufacturers' survey indicated they expect capital spending to rise 0.7% over the next 12 months. This is a big change from the results of the second-quarter survey, in which respondents predicted a 2.5% decline in spending amid the COVID-19 pandemic and resulting economic downturn.

The National Association of Manufacturers' (NAM) third-quarter outlook survey, released in September, drew 472 responses. In all, 66% of the respondents indicated they felt positive about their own company's outlook. In comparison, only 33.9% of the respondents in the previous survey indicated they felt positive.

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According to the NAM survey, 37% of manufacturers anticipate additional capital spending in the next year, with 41.1% expecting no change and 21.9% seeing reduced capital expenditures. By firm size, small (those with 49 or less employees), medium (between 50 and 499 employees) and large manufacturers (500 or more employees) see capital spending increasing 0.3%, 0.7% and 0.9%, respectively.

The previous survey results were the worst since the Great Recession of 2009, NAM said. For related information, see May 2020, article - Manufacturers Survey: Capital Expenditures Expected to Drop 2.5% in Next 12 Months.

The manufacturing economy has seen a rebound since the second quarter of this year, according to NAM. During the second quarter, manufacturing production dropped 20.2% between February and April, with employment in the sector off by 1,363,000. In the latest NAM survey, conducted August 14-28, 50.6% of the manufacturers reported higher production in the third quarter than in the second quarter.

However, 62% of the survey respondents indicated they expect their firm's revenues will not get back to pre-COVID-19 levels until 2021 or later.

On Thursday, 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.

Of the 18 industry sectors followed by the ISM, 14 reported growth in September, including electrical equipment, appliances & components; chemical products; miscellaneous manufacturing; plastics & rubber products; machinery and others. Among the four industries that reported a contraction in September were petroleum & coal products and primary metals.

"While certain industry sectors are experiencing difficulties that will continue in the near term, the manufacturing community as a whole has learned to conduct business effectively and deal with the variables imposed by the COVID-19 pandemic," said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.

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.