U.S. factory spending on new machinery, in the doldrums for the past two years, should rebound in 2003 with a modest increase, according to a survey by the National Association of Manufacturers.
The NAM report, released March 3 during the National Manufacturing Week trade show in Chicago, could signal some relief for machinery makers.
Before the downturn, capital spending helped fuel the longest-ever U.S. economic expansion in the late 1990s. As consumer spending has held up, economists now are watching business spending, which could spur a solid recovery.
``I think it's positive,'' NAM President Jerry Jasinowski said of the survey, which showed most manufacturers plan to boost capital spending between 2.5 and 5 percent from 2002 levels.
Jasinowski said spending should increase more in the second half of the year. ``I don't think there are too many people who think you're going to see anything substantially above 5 percent,'' he said.
Plastics processors exhibiting at the show echoed that humble outlook. Several said they have picked up one or two machines recently, but in general plan to hold steady with existing equipment this year.
Victor Plastics Inc. bought a 3,000-ton Toshiba press, which was installed in December, said Alan Rosenfield, director of business development. That was the company's 105th machine, and he added that the Victor, Iowa-based molder is ``going to let it ride right now'' until the economic outlook gets clearer.
Jeff Lippus, sales engineer at Mercury Plastics Inc. in Middlefield, Ohio, said the company bought a Davis-Standard extrusion line to make multilayer automotive tubing last year, but had not added any injection presses recently.
``It's tough right now to buy machines,'' Lippus said.
Manufacturing seems to be on the cusp of a recovery, but with plenty of potential roadblocks in the way, industry officials said during the March 3-6 show at McCormick Place. They include war with Iraq, health-care costs that are soaring again, the stumbling stock market and skyrocketing prices for oil and for natural gas.
Those question marks make the economy difficult to forecast. Boston-based AMR Research released a survey in Chicago two hours before NAM's results that said capital spending will remain flat in 2003, with perhaps a tiny uptick.
AMR Vice President Bill Swanton said the survey of people who planned to attend the trade show turned up optimism, especially by small companies. ``People are seeing some positive trends,'' he said.
But in a recovery, he noted, companies want to first improve profit as sales rebound. ``People are going to keep their capital budgets under control,'' Swanton said. ``I think people will be cautious all year.''
Machinery makers suffered through a brutal 2001 and 2002. Capital spending by manufacturers fell for eight straight quarters, before finally edging up in the fourth quarter of 2002, Jasinowski said. According to NAM's survey, 62.9 percent of the responding companies said they would boost capital spending on equipment by up to 5 percent this year. Nearly 70 percent said they would increase spending that same amount for computer systems and software.
NAM said three-fourths of the 300 survey respondents agreed that the United States faces a ``manufacturing crisis.'' About 2 million U.S. factory jobs have vanished since the beginning of 2001.
The Bush administration is taking notice, said U.S. Secretary of Commerce Don Evans. In a keynote speech in Chicago March 5, Evans announced that government leaders are working on a comprehensive report outlining what government can do to maximize competitiveness of manufacturing. That report is due by midsummer.
``The president and I understand that recovery of the U.S. manufacturing sector is crucial for sustained, robust economic growth across this country,'' Evans said.
Last year, Bush's stimulus package changed the depreciation write-off schedule for new capital investments. In his current tax proposal, the president wants Congress to accelerate the write-off even faster for small businesses, according to Evans. Bush also wants to triple the expensing allowance for small business equipment purchases, to $75,000.
