Spending on Capital Equipment in the US Revives

Added by Gary Dunn on September 27, 2010

Orders and spending for capital equipment in the US revived in August 2010, and was not as severely hit as predicted by economists.

Though total orders declined by 1.3 percent, bookings increased more than projected. A drop in orders were triggered by lower demand for transportation equipment like aircraft and automobiles. However, bookings for certain goods like communications gear and computer systems increased by 4.1 percent from July when it had declined by 5.3 percent.

Manufacturing companies played a pivotal role in leading the U.S. out of recession and used their profits in ordering and replacing obsolete equipment. Also, the purchase of homes remains unchanged. Deere & Co expects a 5 to 10 percent increase in sales from farm-equipment manufacturing this year.

These trends have prompted economists to revise their projections of investment in capital equipment. Morgan Stanley has upped their forecasts of spending on software and equipment from 5 percent to 11.5 percent. On September 23, 2010, the Standard & Poor’s 500 Index increased by 1.6 percent.

Such projected boost in economic growth is assuring for the Federal Reserve which was earlier thinking of taking added measures to revive economic growth.

To further boost capital spending and jobs, President Barack Obama has proposed $180 billion in tax breaks and investment in infrastructure.