Global corporate capital
expenditure growth is finally turning positive says S&P Global Ratings,
forecasting 5.5% growth in 2017 in what is the fifth edition of its annual
survey, "Global Capex: Ready For Takeoff."
Encouragingly, the recovery is broad-based, with positive growth expected in
all regions and in nearly all sectors. Both Japan and Western Europe are
expected to see double-digit capex growth of 11% and 10%, respectively, while
prospects for Asia-Pacific excluding Japan (+3%) and North America (+4%) are
more modest. While in 2016, only Japan saw a positive contribution; for 2017,
all regions are expected to see positive growth, with Western Europe's
turnaround the biggest single contributor.
A similar picture can be seen in terms of prospective sector growth. Only
telecoms are expected to see capex decline (-4.8%), reflecting a peak in 4G
network investment by the largest Chinese telecom companies. Double-digit
increases are expected in the IT (+13.8%) and consumer (+11.2%) sectors, and
more modest 2%-6% growth rates expected for all others.
Gareth Williams Companies , Senior Director, Corporate Research, S&P Global Ratings,
"The improved outlook for capex is important economically, as it will help
make recoveries more sustainable, but also for the longer-term growth
prospects of the corporate sector which has seen a lost decade of capex
"Greater capital spending not only signifies growing confidence in the
durability of this recovery but, by helping lessen reliance on an
extraordinary degree of monetary stimulus, also helps to make the improvement
more sustainable in the medium term and less vulnerable to the gradual
withdrawal of ultra-cheap money."
There are reasons to believe that this is unlikely to be a false dawn for
capex. There are other indicators of confidence that suggest that sustained
recovery is underway, including improved signals from R&D spending, a recovery
in operating performance for companies in aggregate and, crucially, the ending
of the commodity capex crunch. Energy and materials retained a 19% share of
total capex in 2016 and the oil & gas and metals & mining sectors are both
expected to see modest increases in capex in 2017, after falling by 45%
between 2013 and 2016.
Current consensus and guidance-based estimates for growth 2018 and 2019 are
less positive, suggesting a stalling of growth, but our analysis suggests that
there is a persistent tendency for analysts' second- and third-year capex
estimates to underestimate how much will be spent. We expect to see these
early estimates for 2018 revised higher in coming months as companies set out
their plans for next year. Only a slipping back into recession in one of the
major economic regions would seem likely to have the potential to undermine
the positive capex momentum now in play.
Only a rating committee may determine a rating action and this report does not
constitute a rating action.
ValueSpectrum.com News Wire & Equity Research: +31 084-0032-842
Copyright analist.nl B.V.
All rights reserved. Any redistribution, duplication or archiving prohibited. analist.nl doesn't warrant the accuracy of any News Content provided and shall not be liable for any errors, inaccuracies or for any actions taken in reliance thereon.