The Fact News Service

Why global companies are spending heavily on new plants, machinery

Workers assemble built-in appliances at the Whirlpool manufacturing plant in Cleveland, Tennessee August 21, 2013. The 1-million-square-foot production facility produces cooking products for Whirlpool's portfolio of brands. Picture taken August 21, 2013. REUTERS/Chris Berry (UNITED STATES - Tags: BUSINESS INDUSTRIAL) - TM4E98M0NGP01
New Delhi, September 13

Global companies from noodle makers to semiconductor giants are spending on new plants and machinery in ways they haven’t done for years. On the supply side, blockages brought on by the Covid-19 pandemic are forcing businesses to invest in new production facilities; calls for a cleaner environment are spurring spending on electric vehicles, batteries and alternative energy; and the big semiconductor crunch has prompted a wave of investment.

On the demand side, pent up consumer spending is convincing executives that capital is worth outlaying — a sign that business is buying into the world’s economic recovery prospects even as the delta strain casts a shadow. Driving it all are low interest rates and bets they’ll stay that way.

Globally, corporate capital expenditure, or capex, will jump by 13% this year, according to S&P Global Ratings, with growth in all regions and broad sectors — especially in semiconductors, retail, software and transportation. Economists at Morgan Stanley forecast that global investment will reach 115% and 121% of pre-recession levels by the end of 2021 and end of 2022, a much faster recovery than previous downturns.

“A recovery in business investment is critical for longer-term growth, as capital accumulation is key for lifting productivity growth,” said Rob Subbaraman, head of global markets research at Nomura Holdings Inc. “Once the unprecedented global policy stimulus fades, the world needs business investment and structural reforms to sustain growth.”

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