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Article18 Jun 2021

US Capex on the Comeback Trail

Citi’s latest review of the 2021 capex intentions of nearly 750 US publicly-traded nonfinancial companies showed further improvement, indicating a willingness to buy capital goods despite higher stock prices. We highlight the standout findings from the survey.

An expected surge of roughly 49% in Automotive industry expenditures and double-digit investment jumps for Machinery and Industrial Conglomerates underline the need for new equipment. That said, the oil & gas industry still faces regulatory and environmental headwinds, and is heading to be down 14.5% after a 33.9% drop last year, led by a 44.5% plunge in Pipeline and Gas Utilities.

The IT sector looks set for a 21.1% bump in capex this year, after a 4.3% dip in 2020. Overall projected IT spend of $97.3 billion for 2021 is about 25% more than for the hydrocarbon space; in 2019, Energy at $137 billion was more than 60% above tech.

Hiring intentions could also be impactful, as shown in the first chart below, since investment tends to move simultaneously with new jobs – see the second chart below – as companies provide more employees with the tools to do their work. It should be noted that in an increasingly information-driven society, the greater proportion of non-residential fixed investment is coming from IT.

Easing credit conditions are making corporate investing especially attractive, as underlined in the latest senior loan officers’ survey. Commercial and industrial lending standards have consistently been crucial lead indicators and the ongoing betterment on that front allows CFOs to finance projects effectively without needing exceptional returns on investment.

Quarterly Employment Change (Thousands) and Manpower Survey: % Firms Planning to Increase Jobs

Private Nonresidential Fixed Investment vs. Employment

Source: Haver Analytics, Citi Research - US Equity Strategy

Source: Haver Analytics, Citi Research - US Equity Strategy

For more information on this subject, please see The Continued Capex Comeback 

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.


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