Recovery Accelerates as Company Spending Rises Most Since 2006

[DrToast]

Feb. 1 (Bloomberg) -- Evidence of a self-sustaining U.S. recovery is emerging on the factory floors of Texas Instruments Inc. The second-largest U.S. chipmaker will spend almost $1 billion this year to expand three factories and open a fourth to fill orders.

The need to rebuild industrial capacity after the largest decline on record in 2009 is boosting capital spending and may spur hiring. Beneficiaries are led by technology equipment- makers Intel Corp., Applied Materials Inc. and EMC Corp., as well as industrial product providers General Electric Co. and Rockwell Automation Inc.

Capital spending will increase the total productive capacity of the U.S. economy above its pre-recession level of December 2007, helping gross domestic product grow at a 2.7 percent annual rate in 2010, according to the median forecast of 67 economists in a Jan. 14 Bloomberg News survey. That would be the fastest rate since 2006.

“Our business is growing so we have to build out capacity,” Dave Pahl, Texas Instruments’ director of investor relations, said from Dallas. “Our customers are increasing what they’re building, so that’s increasing our revenue.”

Business executives say spending will increase further as profits rise -- third-quarter earnings increased 10.8 percent, according to Commerce Department figures, the most in more than five years -- and demand strengthens. Of U.S. companies followed by Morgan Stanley analysts in New York, 38 percent intend to raise capital spending over the next three months, up from a low of 3 percent in August.

‘Very Powerful Recovery’

“The groundwork has been laid for a very powerful recovery in capital spending,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. “It won’t take much of a spark to get companies to start spending and hiring.”

(more)

http://www.bloomberg.com/apps/news?pid=20601109&sid=aXgzbLX2j53Y&pos=10

This ain't just inventory rebuilding, folks.

[vaberella]

1. Thanks DT, I've been looking forward to your posts.

The most informative in my opinion when it comes to economics on this board. Thanks for the heads up, this is good news and right in time.

[dmallind]

2. And this new soundbite ( I hate the DU-overuse, mostly incorrect, of "meme") of "just inventory"

is a stupid regurgitation that demonstrates less than a moment's thought on the part of those using it as an excuse to spin good (not great but good) news as doom. Why do you need to rebuild inventory? Because you don't have enough. Why don't you have enough? Because demand exceeds supply, and because demand has reduced your previously adequate inventory level.

Rebuilding inventory, even if this gain were "only" that, is a very good thing indeed. It's the last stage before hiring new workers to keep up with demand.

[DrToast]

3. Exactly!

Inventory replenishment is a normal part of a recovery. In fact, it actually helps sustain the recovery.

[liberal N proud]

4. Good news.

[Kdillard]

5. That is great news. Hopefully the good news will keep on rolling.