American companies poised to boost capital spending

American companies are poised to put idle cash to work as demand rebounds in 2013 after spending slumped amid the slowdown in China and Europe’s recession.

Manufacturers project they will invest more next year than this year, according to the Institute for Supply Management’s semiannual survey released yesterday. Orders for capital equipment excluding defense and aircraft rose 2.9 percent in October, the biggest increase since February, Commerce Department data showed Nov. 27.

Apple Inc., Starbucks Corp. and Chevron Corp. are among those announcing additional expenditure plans as economies stabilize, banks ease lending rules and some industries approach full capacity. Companies, excluding financial institutions, are sitting on a record $1.74 trillion in liquid assets that could be put to use, especially if lawmakers agree to avert budget cuts and tax increases scheduled to take effect in January.

“Businesses are flush and highly competitive and this will shine through in a revival of investment spending by this time next year if Washington can get it roughly together,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania.

Spending on capital projects, those meant to increase productivity and capacity, will increase 7.6 percent next year, the biggest gain for any December survey going back at least seven years, according to the Tempe, Arizona-based ISM’s poll of purchasing managers. Last December, respondents forecast a 1.9 percent advance for 2012.

Executive Survey

A survey conducted by American Express Co. from Nov. 12 to Nov. 21 showed similar positive outlooks. Seventy-five percent of senior finance executives polled forecast sales will grow in 2013, and 69 percent project profits will improve. A majority, 59 percent, plan to invest to drive growth, in contrast to 37 percent who said they were focused on saving money to protect earnings, the survey showed.

“Companies’ expectations should pick up in the second half of 2013 and business spending should accelerate,” said Christophe Barraud, an economist and strategist at Market Securities-Kyte Group in Paris, top-rated forecaster of the U.S. economy in Bloomberg Rankings for the two years ended Oct. 31. He credits the low interest-rate policies followed by global central banks and government efforts in Europe and Japan to stimulate growth.

The Federal Open Market Committee, meeting today, is weighing more stimulus to bolster the U.S. economy, the world’s largest. The central bank may supplement $40 billion a month of mortgage-bond purchases with Treasury purchases, according to a Bloomberg survey of economists.