Thursday, May 17, 2012

Floodgates Opening?

Even with all of the recent bad news from Europe, there is still some good news out there.  I read the following blog post Tuesday morning on the "Wall Street Journal" website:  Companies Aim to Start Spending Trillions They’re Hoarding.  It reports the results of the American Express/CFO Research Global Business & Spending Monitor, which recounts a notable increase in the number of companies planning on spending, rather than hoarding, cash in the near future.
Here's an excerpt from the blog post:
"Corporations around the globe are finally planning to spend some of the nearly $8 trillion in emergency cash they’ve amassed..."
"Where will the cash go? Broadly speaking, corporate executives say they’re planning to boost operating capacity, research and development and mergers and acquisitions. Importantly, some 53% hope to raise headcount over the 12 months.
The survey’s U.S. findings dovetail with a recent Wall Street Journal analysis of 468 companies that detected a rebound in capital spending, or spending on new plants and equipment.
Increased talk of business spending – even if it’s mostly talk – is good news for the U.S. economy, which has leaned heavily on exports and the manufacturing sector to power its recovery since mid-2009."
Back during the depths of the financial crisis, we, along with many others, noted that (non-financial) corporations were still very healthy, having dramatically cleaned up their balance sheets after the Enron scandal.  These companies have been building enormous cash reserves over the past few years, and if they indeed begin spending this cash, it can be nothing but good news for the economy.  I'd say we could all use some good news...