Corporate investment

Innovation nations

Firms are rediscovering their love for investment

 

 


 

May 29th 2021 | words 604

 

 

 

 

AS THE RICH world reopens, the contours of the post-pandemic economy are becoming clear. The latest trend is a global surge in capital spending. Forecasters reckon that overall real investment worldwide will soon be a fifth higher than it was before the pandemic. Americas business investment is rising at an annual rate of 15%. By 2022 companies in the S&P 500 are forecast to be spending over a tenth more on factories, technology, R&D and the like. Barely a day goes by without a large firm boasting about how much it plans to splurge. AT&T says it will throw $24bn a year at its networks. Sony is piling $18bn into an expansion push. Semiconductor firms are engaged in one of the biggest capital-spending (or capex) sprees in history.

 

contour

contour / kntu(r); NAmE kntur / 

noun 

1. the outer edges of sth; the outline of its shape or form

The road follows the natural contours of the coastline.   

 

She traced the contours of his face with her finger.  

 

2. (also 'contour line) a line on a map showing points that are the same height above sea level

()

a contour map (= a map that includes these lines)  

 

 

engage

engage / ingeid / 

verb

 en'gage in sth  | en'gage sb in sth to take part in sth; to make sb take part in sth (),

Even in prison, he continued to engage in criminal activities.   

 

She tried desperately to engage him in conversation.  

 

spree

spree / spri / 

noun 

1. a short period of time that you spend doing six particular activity that you enjoy, but often too much of it

(),

a shopping / spending spree   

 

He's out on a spree. 

 

2. (used especially in newspapers ) a period of activity, especially criminal activity

,(): 

to go on a killing spree   

 

capex

noun

short for capital expenditure

 

 

 

That is both a sharp change and an enormously significant one. Sharp, because before covid-19 managers embraced capex austerity. Americas business investment had stagnated relative to GDP for several decades. Britains was 15% lower than in the late 1990s. Even as business profits soared, firms devoted a smaller share of their cashflows to capex and R&D, and more to share buybacks and dividends. Significant, because investment in new technologies and business practices is the secret sauce behind higher living standards. Weak capital spending contributed to the rich worlds sluggish productivity and growth in the 2010s, and to the gnawing sense that capitalism was misfiring.

 

 austerity

austerity / sterti; ster- / 

noun (pl. -ies)

1. [U] a situation when people do not have much money to spend because there are bad economic conditions

()

War was followed by many years of austerity.   

2. [U] the quality of being austere 

the austerity of the monks' life   

 

3. [C, usually pl.] something that is part of an austere way of life

the austerities of wartime Europe   

 

stagnate

stagnate / stgneit; NAmE stgneit / 

verb [V] 

1. to stop developing or making progress

Profits have stagnated.   

 

I feel I'm stagnating in this job.   

,

2. to be or become stagnant 

The water in the pond was stagnating.  

 

stagnation / stgnein / 

noun [U] : 

a period of economic stagnation   

 

sauce

sauce / ss / 

noun 

1. [C, U] a thick liquid that is eaten with food to add flavour to it

tomato / cranberry / chilli, etc. sauce   

 

chicken in a white sauce   

 

ice cream with a hot fudge sauce   

 

-- see also soy sauce , tartare sauce , white sauce 

2. [U] (old-fashioned, BrE, informal) talk or behaviour that is annoying or lacking in respect

()()


gnawing

gnawing / ni / 

adj. [only before noun]

making you feel worried over a period of time

(),,

gnawing doubts   

 

 

 

Now, though, all that is changing. Fiscal stimulus has put money in peoples pockets. In America real disposable income per person is 27% higher than it was in February 2020. And as economies reopen, people are in the mood to spend. Companies can thus be more confident there will be demand for their wares in the next few yearsas good an incentive as any to expand capacity. Some firms, especially in consumer-facing industries, are low on inventory and are frantically trying to catch up.

 

 frantic

frantic / frntik / 

adj. 

1. done quickly and with a lot of activity, but in a way that is not very well organized

SYN hectic 

a frantic dash / search / struggle   

/  

They made frantic attempts to revive him.  

 

Things are frantic in the office right now.   

2. unable to control your emotions because you are extremely frightened or worried about sth

(),

SYN beside yourself 

frantic with worry   

 

Let's go back. Your parents must be getting frantic by now.  

 

The children are driving me frantic (= making me very annoyed).  

frantically / -kli / adv.

They worked frantically to finish on time.   

 

 

Yet capital spending is rising not just because the economic cycle is on the up. Firms are also adjusting to permanent pandemic-induced shifts, from an emerging norm of hybrid work to greater online shopping. The big tech firms, whose products are so important to this shift, have led the investment charge. In 2020 they accounted for a third of total R&D spending in the S&P 500; this year they are boosting capex by 30% relative to 2019.

 

induce

induce / indjus; NAmE -dus /

verb [VN] (formal) to cause sth

drugs which induce sleep  

  

 a drug-induced coma   

 

Other companies now recognise that they need to pull up their socks. High-street retailers are at last investing heavily in online offerings to compete with Amazon. Restaurants continue to improve their dine-at-home service even as dine-in (have dinner at home) reopens, allowing them to squeeze more sales out of preparing food. Consultancies are finding ways to let their staff remain connected when they are not in the office. Growth in global shipments of computers for companies will be even faster this year than last. All this promises a world in which people get more done in less time.

 

 

pull up (one's) socks

To make a redoubled effort; to make a sincere attempt to improve.

 After that abysmal grade on my midterm exam, I'm going to have to really pull up my socks if I want to pass math this year.

 John, if you don't start pulling up your socks, we're going to have to give your job to someone else.

 

 

Firms in some industries still play by the rules of the 2010s. Mining companies seem cautious about shelling out in order to relieve supply bottlenecks in commodity markets. Big hotel chains appear to have no plans to install rainforest showers in every room. And it remains to be seen whether the post-pandemic norm will be one of structurally higher investment spending, or whether firms slip back into their old ways. For now, though, stand back and appreciate the global capex surge. It promises a more dynamic form of capitalism. 

 

 







\n

Economist | Innovation nations



 

Corporate investment

Innovation nations

Firms are rediscovering their love for investment

 

 


 

May 29th 2021 | words 604

 

 

 

 

AS THE RICH world reopens, the contours of the post-pandemic economy are becoming clear. The latest trend is a global surge in capital spending. Forecasters reckon that overall real investment worldwide will soon be a fifth higher than it was before the pandemic. Americas business investment is rising at an annual rate of 15%. By 2022 companies in the S&P 500 are forecast to be spending over a tenth more on factories, technology, R&D and the like. Barely a day goes by without a large firm boasting about how much it plans to splurge. AT&T says it will throw $24bn a year at its networks. Sony is piling $18bn into an expansion push. Semiconductor firms are engaged in one of the biggest capital-spending (or capex) sprees in history.

 

contour

contour / kntu(r); NAmE kntur / 

noun 

1. the outer edges of sth; the outline of its shape or form

The road follows the natural contours of the coastline.   

 

She traced the contours of his face with her finger.  

 

2. (also 'contour line) a line on a map showing points that are the same height above sea level

()

a contour map (= a map that includes these lines)  

 

 

engage

engage / ingeid / 

verb

 en'gage in sth  | en'gage sb in sth to take part in sth; to make sb take part in sth (),

Even in prison, he continued to engage in criminal activities.   

 

She tried desperately to engage him in conversation.  

 

spree

spree / spri / 

noun 

1. a short period of time that you spend doing six particular activity that you enjoy, but often too much of it

(),

a shopping / spending spree   

 

He's out on a spree. 

 

2. (used especially in newspapers ) a period of activity, especially criminal activity

,(): 

to go on a killing spree   

 

capex

noun

short for capital expenditure

 

 

 

That is both a sharp change and an enormously significant one. Sharp, because before covid-19 managers embraced capex austerity. Americas business investment had stagnated relative to GDP for several decades. Britains was 15% lower than in the late 1990s. Even as business profits soared, firms devoted a smaller share of their cashflows to capex and R&D, and more to share buybacks and dividends. Significant, because investment in new technologies and business practices is the secret sauce behind higher living standards. Weak capital spending contributed to the rich worlds sluggish productivity and growth in the 2010s, and to the gnawing sense that capitalism was misfiring.

 

 austerity

austerity / sterti; ster- / 

noun (pl. -ies)

1. [U] a situation when people do not have much money to spend because there are bad economic conditions

()

War was followed by many years of austerity.   

2. [U] the quality of being austere 

the austerity of the monks' life   

 

3. [C, usually pl.] something that is part of an austere way of life

the austerities of wartime Europe   

 

stagnate

stagnate / stgneit; NAmE stgneit / 

verb [V] 

1. to stop developing or making progress

Profits have stagnated.   

 

I feel I'm stagnating in this job.   

,

2. to be or become stagnant 

The water in the pond was stagnating.  

 

stagnation / stgnein / 

noun [U] : 

a period of economic stagnation   

 

sauce

sauce / ss / 

noun 

1. [C, U] a thick liquid that is eaten with food to add flavour to it

tomato / cranberry / chilli, etc. sauce   

 

chicken in a white sauce   

 

ice cream with a hot fudge sauce   

 

-- see also soy sauce , tartare sauce , white sauce 

2. [U] (old-fashioned, BrE, informal) talk or behaviour that is annoying or lacking in respect

()()


gnawing

gnawing / ni / 

adj. [only before noun]

making you feel worried over a period of time

(),,

gnawing doubts   

 

 

 

Now, though, all that is changing. Fiscal stimulus has put money in peoples pockets. In America real disposable income per person is 27% higher than it was in February 2020. And as economies reopen, people are in the mood to spend. Companies can thus be more confident there will be demand for their wares in the next few yearsas good an incentive as any to expand capacity. Some firms, especially in consumer-facing industries, are low on inventory and are frantically trying to catch up.

 

 frantic

frantic / frntik / 

adj. 

1. done quickly and with a lot of activity, but in a way that is not very well organized

SYN hectic 

a frantic dash / search / struggle   

/  

They made frantic attempts to revive him.  

 

Things are frantic in the office right now.   

2. unable to control your emotions because you are extremely frightened or worried about sth

(),

SYN beside yourself 

frantic with worry   

 

Let's go back. Your parents must be getting frantic by now.  

 

The children are driving me frantic (= making me very annoyed).  

frantically / -kli / adv.

They worked frantically to finish on time.   

 

 

Yet capital spending is rising not just because the economic cycle is on the up. Firms are also adjusting to permanent pandemic-induced shifts, from an emerging norm of hybrid work to greater online shopping. The big tech firms, whose products are so important to this shift, have led the investment charge. In 2020 they accounted for a third of total R&D spending in the S&P 500; this year they are boosting capex by 30% relative to 2019.

 

induce

induce / indjus; NAmE -dus /

verb [VN] (formal) to cause sth

drugs which induce sleep  

  

 a drug-induced coma   

 

Other companies now recognise that they need to pull up their socks. High-street retailers are at last investing heavily in online offerings to compete with Amazon. Restaurants continue to improve their dine-at-home service even as dine-in (have dinner at home) reopens, allowing them to squeeze more sales out of preparing food. Consultancies are finding ways to let their staff remain connected when they are not in the office. Growth in global shipments of computers for companies will be even faster this year than last. All this promises a world in which people get more done in less time.

 

 

pull up (one's) socks

To make a redoubled effort; to make a sincere attempt to improve.

 After that abysmal grade on my midterm exam, I'm going to have to really pull up my socks if I want to pass math this year.

 John, if you don't start pulling up your socks, we're going to have to give your job to someone else.

 

 

Firms in some industries still play by the rules of the 2010s. Mining companies seem cautious about shelling out in order to relieve supply bottlenecks in commodity markets. Big hotel chains appear to have no plans to install rainforest showers in every room. And it remains to be seen whether the post-pandemic norm will be one of structurally higher investment spending, or whether firms slip back into their old ways. For now, though, stand back and appreciate the global capex surge. It promises a more dynamic form of capitalism. 

 

 







\n

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