Survey: U.S. Manufacturers Lower Capital-Spending Expectations

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Researched by Industrial Info Resources (Sugar Land, Texas)--U.S. manufacturers' capital-spending expectations are down from last quarter, according to a quarterly survey by the National Association of Manufacturers (NAM). Respondents to the survey anticipate an increase of 1.8% in capital spending over the next 12 months, lower than 2.3% in fourth-quarter 2022--and the lowest rate since May 2020.

NAM released the results of its outlook survey on March 27. The survey ran from February 21 to March 7 and received 351 responses, featuring small (those with 49 or less employees), medium-sized (between 50 and 499 employees) and large manufacturers (500 or more employees).

According to the survey results, nearly 45% of respondents expect additional capital spending in the next year, with 36% predicting no change and 19.1% forecasting reduced capital expenditures. Small, medium-sized and large manufacturers anticipated 0.8%, 1.7% and 2.2% growth over the next 12 months, respectively.

Manufacturers indicated attracting and retaining a quality workforce tops the list of primary business challenges they face (74.9% of respondents), followed by increased raw material prices (60.1%) and supply-chain challenges (55.8%).

More than 59% of respondents said not having enough employees will impact their investments.

Meanwhile, nearly half of respondents involved in upgrading and repairing infrastructure do not believe funds from the $1.2 trillion bipartisan 2021 Infrastructure Investment and Jobs Act are being distributed in a timely manner. The law provides roughly $550 billion in new federal investment, from fiscal years 2022 through 2026, in the country's roads and bridges and mass transit, broadband, airports and ports, among others.

Respondents also pointed to governmental policies that could affect project activity: more than 90% said "higher tax burdens on manufacturing income" would make it difficult to grow their workforce, invest in new equipment or expand facilities; nearly 94% noted "increased regulatory burdens" would also affect those efforts; and more than 55% said new proposed air-quality standards for particulate matter from the Environmental Protection Agency would raise compliance costs, reduce investment and limit expansions, and possibly force shutdowns.

However, they did not only express doom and gloom: the survey noted 74.7% of respondents felt positive about their own company's outlook, up from 68.9% last quarter. Meanwhile, a little less than 50% expect a recession in 2023--down from 62.4% in last quarter's survey.

Regarding supply chains, nearly 40% expect supply-chain improvement in the next three quarters and 61.3% expect improvement by the end of the year; of the companies surveyed engaged in international trade, 62.3% of respondents said they plan to increase investments and/or sourcing in the U.S. after reevaluating supply chains.

Those positive sentiments are reflected in the $71.7 billion worth of capital Industrial Manufacturing projects across the U.S. that are set to begin construction in the second quarter, according to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database. Subscribers to the GMI Database can click here for a full list of projects.

The following sectors account for nearly $60 billion of the spend: semiconductors & computers ($30.29 billion); automotive ($14.7 billion) and data centers ($14.2 billion).

Companies in the U.S. are ramping up projects to improve the semiconductor shortage and boost onshore production: Micron Technology Incorporated's (NASDAQ:MU) (Boise, Idaho) $15 billion expansion of its Boise Fab 4 Memory and Semiconductors Campus in Boise is planned to kick off next month. The project entails constructing a 600,000-square-foot cleanroom, 92,000-square-foot fabrication building to expand wafer production, and other buildings, plus new production lines and fabrication equipment, to produce semiconductor memory chips for the automotive and data center sectors, among others. Subscribers can click here for a detailed project report.

Micron plans to invest more than $40 billion through 2030 to boost memory-chip manufacturing in the U.S., with production beginning in the second half of the decade.

Also expected to kick off next month is GlobalFoundries Incorporated's (Malta, New York) $10 billion expansion of its semiconductor plant in Malta, New York, which entails adding nine buildings totaling 633,000 square feet to the existing 950,000-square-foot manufacturing plant. Click here for the project report.

For information on data center projects that are planned to kick off in the second quarter, see Industrial Info's March 10, 2023, article - U.S. Data Centers Set for $14 Billion in 2Q Starts Amid A.I. Boom, and for information on automotive projects, see March 16, 2023, article - EV Demand Drives $15 Billion in 2Q U.S. Auto Industry Kickoffs.

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 over 200,000 current and future projects worth $17.8 Trillion (USD).