U.S. manufacturers ready to invest despite approach of fiscal cliff

December 13, 2012

While the lawmakers still debate the potential fiscal cliff, a survey by the Institute of Supply Management indicates that U.S. manufacturers are ready to spend in 2013.

According to Bloomberg, the semiannual report showed that orders for capital equipment rose by 2.9 percent in October, while purchasing managers at U.S. factories are predicting that sales will grow by 4.6 percent in the next fiscal year. Manufacturers are also expected to loosen the purse strings when it comes to business strategy and investment, with the ISM report anticipating a rise of 7.6 percent nationwide and 4.3 percent rise in service provider revenue.

"Manufacturing, purchasing and supply executives expect to see continued growth in 2013,” said Bradley Holcomb, chairman of the ISM factory committee, said in a press statement. "They are optimistic about their overall business prospects for the first half of 2013 and are even more optimistic about the second half."

U.S. companies that have been operating under the principles of lean enterprise also expect hiring to increase slightly in 2013. Employment is projected to rise by 0.8 percent next year, while service providers expect to see a nationwide increase of 1.3 percent, as more manufacturers invest in technology and new equipment. Input prices are also set to show signs of improvement, with factory leaders and economists estimating a rise of 2.8 percent by the end of 2013.

"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.

With U.S. companies, excluding financial institutions, allegedly sitting on $1.74 trillion in liquid assets, industry analysts believe the discussions regarding the fiscal cliff need to come to some sort of a conclusion. According to the news source, companies such as Caterpillar and John Deere are expected to benefit from a pickup in U.S. capital spending, while a commitment to quality management in manufacturing could take advantage of a projected 3.6 percent growth of the global economy.

"The pattern of orders for capital equipment, a proxy for future business investment, makes blaming the drop in business investment on fiscal-policy concerns less compelling," commented Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. in New York. "We think we’ve turned the corner and the global economy will modestly improve, which should support capital expenditures."