Commentary abounds these day about how much corporations are, or are not, cutting back on capital expenditures.
Earlier this month, for example, the Financial Times had an article exploring how Corporate America supposedly isn’t spending more money on capital expenditures — and baldly said, “Capex has flatlined.” Other media pick apart the sweeping corporate tax cut Washington enacted 18 months ago, ostensibly to stimulate exactly the sort of business investment capex represents.
So what’s really going on? Calcbench decided to look at the data and see what it really says. A few points stand out right away.
First, capex spending for all filers overall is falling. We reviewed the capex numbers reported by more than 10,000 firms for the last five years. Capex spending peaked in 2015, with total spending at $1.46 trillion. The numbers then sloped downward for two years — and then that decline accelerated a lot in 2018. See Figure 1, below.
Average capex spending per filer, however, ticked upward last year — from $233 million in 2017 to $268.6 million in 2018. That’s also the highest average capex spending we’ve seen in the last five years.
What’s that about? How can aggregate capex be falling while average capex per filer is rising? One possible reason is that spending among a small number of large companies is rising swiftly, while everyone else is throttling back. So we next looked at capex spending among 423 firms in the S&P 500.
Among that group, capex spending shot up in 2018. Total spending jumped 15.5 percent, to $623.3 billion. Average spending rose 16.3 percent, to $1.47 billion. Median spending rose 9.6 percent to $469 million.
The pattern is irrefutable. Capex spending among the biggest firms in Corporate America rose sharply in 2018, period. See figures 2 and 3, below. Pay particular heed to the trendlines for each, in red.
The single biggest spender in 2018 was Google. It jacked up capex from $13.08 billion in 2017 to $25.04 billion in 2018 — an increase of (gulp) $12.95 billion last year alone. That was the biggest one-year increase of any firm, by far. Table 1, below, shows the top 10.
Even if you exclude those big spenders, however, average and total capex spending in the S&P 500 still rose. In our sample of 423 firms, 289 of them reported more capex spending, versus 123 that trimmed it. Two held capex spending level.
That’s enough data for today. We’ll have more posts on this subject soon, since it’s clearly worth more examination. For now, we can unmistakably say that the data show Corporate America is spending more on capital expenditures, even if the rest of the corporate world is a more murky picture.
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