Two New Reports Point to Top Spending Firms Investing in Growth Domestically and Industries Poised for Growth
Despite $136 billion invested in U.S. property and plants last year by the 25 biggest corporate spenders, the current economic stagnation may be more of an investment drought than a consumption drought, according to new research from Progressive Policy Institute (PPI).
U.S. business investment largely tanked during the Great Recession and has yet to recover. Last year, non-residential investment remained more than 7% below 2007 levels, adjusting for prices. By comparison, personal consumption in real terms was higher in 2011 compared to 2007.
"The decline and lackluster recovery in business investment has a wide range of causes, including globalization, regulatory barriers and weak demand," claimed the report's authors, Diana G. Carew and Michael Mandel. "Many companies are investing overseas rather than in the United States. Multiple layers of regulation, even if well-intentioned, have the impact of discouraging capital investment and innovation. And the continued weakness in demand at home makes it difficult to justify building new factories."
"But no matter what the reason, this weakness is having an adverse effect on economic growth and is one of the main reasons behind the job drought," the two reported.
That said, the PPI authors' point of the research was to highlight those companies that are still investing domestically in buildings, equipment and software.
Using publicly available financial reports, PPI constructed a list of the top 25 nonfinancial U.S.-based companies ranked by their U.S. capital spending in 2011. PPI called these companies "Investment Heroes."
Half of the leading companies are telecom and energy, but the list also includes tech, retail, automotive and entertainment companies.
A separate survey from Deloitte's Emerging Growth Company Practice and the National Venture Capital Association complements PPI's report in that it shows where venture capitalists believe growth will occur in the future.
Venture capitalists from around the globe told the surveyors that there are pockets of optimism in the current environment. Respondents reported more enthusiasm for newer information technology (IT) sub-sectors including cloud computing and social media.
However, despite increased optimism in these areas, the survey revealed that there remains room for considerable improvement in overall global venture capital confidence levels, particularly when it comes to external issues impacting the industry.
Overall, respondents expressed average to low confidence levels regarding external forces impacting their businesses such as the economy, capital markets, public policy making activities and fundraising environments. However, investors' confidence levels are higher when considering investment opportunities and particularly toward investing domestically versus abroad.
"By their very nature, venture capitalists are an optimistic group, but economic uncertainty and other challenging externalities have tested the mettle of the industry in the past year," said Mark Heesen, president of the National Venture Capital Association. "Despite the ongoing market concerns that were exhibited in the survey results, the opportunistic nature of the industry remained clear. Venture capitalists are nimble and can quickly move to where the most promising entrepreneurs, policies and innovations reside."
Jim Atwell, recently named national managing partner of Deloitte & Touche LLP's Emerging Growth Company Practice added, "We are starting to see some positive signs that the global economy is beginning to rebound from where it was two years ago. Venture capitalists are already starting to become more confident within their home countries."
Within their own markets there were a number of sectors where respondents were most confident investing. The U.S. showed slightly more confidence in these sectors: cloud computing, software, new media/social networking and health care IT.
Overall, the sectors with the lowest confidence levels were in semiconductors, telecom, clean technology and biotech.
Top 25 Nonfinancial Companies by U.S. Capital Expenditure
- Company, U.S. 2011 Capital Expenditures ($bils)
- AT&T, $20.1
Verizon Communications, $16.2
Exxon Mobil, $11.7
- Wal?Mart, $8.2
- Intel, $7.4
- Occidental Petroleum, $6.2
- ConocoPhillips, $5.6
- Comcast, $5.3
- Chevron, $4.8
- Southern Company, $4.5
- Hess, $4.4
- Exelon, $4.0
- Ford Motor, $3.9
- General Electric, $3.7
- Enterprise Product Partners, $3.6
- Sprint Nextel, $3.1
- Walt Disney, $3.0
- Time Warner Cable, $2.9
- FedEx, $2.9
- General Motors, $2.8
- Chrysler Group, $2.5
- Target, $2.5
- IBM, $2.5
- Google, $2.2
- Apple, $2.0
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