Don’t count on flood of cap-ex for 2013
December 19, 2012 Leave a comment
There seems to exist a collective hope among financial professionals that there will be a flood of capital expenditures from cash-rich firms when (if?) the “fiscal cliff” is resolved in the US. Unfortunately, there is not always a positive market correlation with increased capital expenditure. Even if there were, Mr. Parker from Morgan Stanley suggests there is no reason to believe this is coming.
- Capital expenditures expected to decline in 2013, from near average levels in 2013. Therefore, upside not expected.
- Overall manufacturing utilization is still below long term average. Current trends indicate slowing utilization.
- Historical analysis suggests pent-up spending in some sectors, yet fundamental analysis suggests otherwise.
- Global inventory-to-sales has been flat for 10 years, there is no evidence suggesting a big capacity surge is forthcoming.
Rather than big cap-ex, 2013 will see mostly lay-offs.