Capital investment Plans: Cause and Effect
In the recently released NAPL Capital Investment Study, sponsored by Canon, 50.6% of survey participants stated that they expect to invest less in capital equipment, hardware, and software over the next three years than they did over the last three years. In contrast, just 20.9% plan to invest more. Among the key factors contributing to the lower capital investment expectations:
The focus is on filling capacity. While 15.3% of the study participants plan to invest more because aging equipment has to be replaced or because they haven’t been investing much and need to catch up, 48.3% plan to invest less because they will focus on filling capacity already in place. It’s the pent-up demand versus capacity-already-in-place battle that follows every recession. Right now capacity-in-place in winning handily.
Uncertainty is dampening investment plans. While 8.2% plan to invest more because they are growing, expect to grow, or are generally excited about their prospects, 34.7% plan to invest less because they are concerned or uncertain about the economy, our industry, or both.
Obviously, things can change drastically from what is happening now, but that’s not likely. To quote the report, “Of course all this can change if the recovery quickly gains vigor and the uncertainty and demand suddenly improve. But that isn’t very likely until well into 2011—at the earliest.” For more information on the NAPL Capital Investment Study, click here.