Did U.S. Companies Just Give the Economy A Vote of Confidence?
With both consumer and governmental spending expected to weaken this year, the United States economy could use another source of stimulus, so it is fortunate that U.S. companies’ capital spending plans are holding up.
Consumer spending has been shown to be diminishing as many Americans have been forced to tighten their financial belts thanks to the harsh effect the increase in the payroll tax has already had on discretionary income. With ongoing debates over fiscal policy — first, the fiscal cliff, then the debt ceiling, and now March’s automated spending cuts — the federal government will have to make spending cuts as well, either forced by the end of the sequester or resulting from a congressional compromise
But a Thomson Reuters analysis shows that this year many Standard & Poor’s 500 firms will be making capital expenditures that exceed analysts expectations. In fact, more companies will beat expectations than at any time in the past four years. The data is based on the reports of 221 companies, 66 percent of which showed capex guidances that were above what analysts had predicted, representing an increase of from last year’s 57 percent. On average, companies are expecting to spend $1.59 billion in 2013. While that is only a modest increase when compared to last year’s forecast of $1.57 billion, analysts had only been counting on expenditures of $1.48 billion.
Analysts had limited their expectations for capital expenditure growth back before congressional negotiations had resolved (at least, temporarily) the fiscal cliff’s combination of tax increases and spending cuts. “A number of companies said we’re planning our budget cycle on worst-possible conditions,” D.A. Davidson & Company chief market strategist Fred Dickson told Reuters, referring to the guiding sentiment at the end of last year…