Capital Spending is Returning to Pre-Crisis Levels for These Companies

U.S. companies including Apple Inc. (NASDAQ:AAPL) and 3M Co. (NYSE:MMM) are seeing capital spending levels last seen in 2008. With upgrades in plants, property and equipment some executives are thinking positively a potential recession will not come this way.

Third quarter numbers showed a 24 percent rise in expenditures to $43.3 billion from 140 non-financial companies in the Standard & Poor’s 500 (NYSEARCA:SPY) according to data from Nov. 4. Beginning with Alcoa Inc.’s (NYSE:AA) earnings report on Oct. 11, third quarter spending produced end of 2010 highs while its $149 billion in year-to-date investments were reminiscent of 2008 highs.

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More positive news from last quarter included a rise in equipment and software investments at a 17.4 percent annual pace and to-date, S&P 500 earnings per share have increased 16 percent. That’s great news for companies such as Caterpillar (NYSE:CAT), General Electric (NYSE:GE), and Oracle (NASDAQ:ORCL).

So what’s the cause for the higher numbers? The slow economic growth is enough of a push for increased investments.

According to Frederic Dickson, chief market strategist for D.A. Davidson & Co.,

“A lot of companies postponed upgrading facilities, hardware and technology given the fact they were fearing the economy would go back into recession,” Dickson said. “Now that they feel more comfortable the economy has skated around recession, they’re making necessary expenditures.”

A second reason offered is the ticking clock on companies to increase capital expenditures before the accelerated depreciation on investments comes to a halt in December. However, this could be extended, according to a Bloomberg article.

Regardless, an increase in capital expenditures may seen as a positive sign in this challenging economy.

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