Strategy

Capex Rising after Two-Year Decline

Capital expenditures in 2004 are forecast to show a year-on-year increase of 5.53 percent, according to Standard & Poor's.
Marie LeoneAugust 26, 2004

Capital expenditures among Standard & Poor’s 500 companies are up following two years of decline, according to a report from Standard & Poor’s. By the end of 2004, capex will likely show a year-on-year increase of 5.53 percent, propelled by “a fourth quarter boost from the demise of the accelerated depreciation schedule this year,” wrote S&P’s Howard Silverblatt.

The equity-markets analyst pointed out that year-over-year capex performance between 2002 and 2003 was a negative 15.16 percent, while the 2001 to 2002 performance was a bit better, at negative 8.95 percent.

Historically, 32 percent of corporate capital expenditures are made during the first six months of the year, on average. The first quarter of 2004 posted a 5.36 percent increase compared with a year ago, according to S&P, and the second quarter saw an improvement of 5.73 percent over the 2003 total.

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Over the 12 months ending with the second quarter, the data also shows a surge in spending by industrials and telecommunication companies. Capex at telecoms, which represent 10 percent of the S&P 500, rose 24.79 percent; capital expenditures at industrials, which represent 16 percent of the companies in the index, jumped 23.75 percent.

Utilities were the most conservative spenders; they registered a negative 30.26 percent change from the second quarter last year. Financial companies also experienced a drop-off, posting a negative 13.17 percent change in spending.

Over the past five years, capex has grown most noticeably at health-care companies, where it has increased 60 percent. The technology sector posted the largest reduction in capital spending, with a 30 percent drop.