U.S. Manufacturers Capital-Spending Expectations Dip as Tax Increases Loom
U.S. manufacturers reported a drop in expected capital expenditures, based on the latest outlook survey by the National Association of Manufacturers (NAM), and respondents said looming tax increases will further threaten capital investment. Despite any negative sentiment, Industrial Info's Global Market Intelligence (GMI) Project Database shows project activity in the U.S. Industrial Manufacturing Industry remains robust.
The NAM survey ran from September 5 to September 20 and received 294 responses, featuring small (those with 49 or less employees), medium-sized (between 50 and 499 employees) and large manufacturers (500 or more employees).
According to the survey results, released October 23, respondents to the survey anticipate an increase of 0.7% over the next 12 months, down from 1.3% in capital spending last quarter and 1.2% in the second quarter; 34.7% expect additional capital spending in the next year (last quarter saw 37.3%), with 43.6% predicting no change and 21.6% reduced capital expenditures (last quarter saw 14.5%).
In addition, 62.9% of respondents felt either somewhat or very positive about their company’s outlook, down from 71.9% in the second quarter. The average over the past four quarters is 67.4%.
Those respondents said tax increases on manufacturers set to go into effect in 2025 would further impact their capital investment. “Nearly 9 out of 10 respondents agree that Congress should act before the end of 2025 to prevent scheduled tax increases on manufacturers,” according to the report. “In addition to the already expired immediate expensing of R&D [research and development], pro-growth interest deductibility standard for business loans and 100% full expensing for capital purchases, tax policies critical to the manufacturing sector, such as the 20% pass-through deduction, individual tax rates and estate tax exemption threshold, will expire or become less favorable at the end of 2025.”
Ahead of the November 5 presidential election, 92.3% of respondents said Vice President Kamala Harris’ should not go through with her proposed increase to the corporate tax rate from 21% to 28%; more than 71% of respondents said this would negatively impact their business, with 57.3% saying it would limit capital investment.
Despite any negative sentiment, Industrial Info's North American Industrial Project Spending Index for the U.S. Industrial Manufacturing Industry shows project spending in September (the latest data available) was $187.6 billion--nearly flat compared with $193 billion in August--and up from $150.5 billion in September 2023.
In addition, Industrial Info is tracking more than $400 billion worth of Industrial Manufacturing Industry projects under construction in the U.S. Many of the high-dollar projects are attributed to semiconductors, electric vehicles (EVs) and related components and data centers, but Industrial Info also is tracking projects across a variety of other manufacturing sectors.
Subscribers to the GMI database can click here for a full list of project reports.
The semiconductor projects under construction include Taiwan Semiconductor Manufacturing Company Limited's (TSMC) (NYSE:TSM) (Hsinchu, Tawain) first two chip fabrication (fab) facilities at a multi-building campus in Phoenix, Arizona. In TSMC’s recent third-quarter earnings call, Chief Executive Officer C.C. Wei said the first fab (2.3 million square feet) will begin volume production at the beginning of 2025. Meanwhile, the second fab is scheduled to begin volume production in 2028, Wei said, with a proposed third fab beginning production by the end of the decade. According to TSMC, the three fabs account for a combined $65 billion worth of investment. Subscribers can read detailed reports on Phase I, Phase II and Phase III; three subsequent phases could follow.
In April, the U.S. Department of Commerce entered a nonbinding preliminary agreement with TSMC for a CHIPS and Science Act award package with $6.6 billion in grants and up to $5 billion in loans for the project.
Automotive projects underway include the construction of two EV battery plants, both of which are expected to open in 2025 and feature an annual production capacity of 30 gigawatt-hours: a $5 billion lithium-ion EV battery plant in Kingston, Georgia for joint owners Hyundai Motor Group and lithium-ion battery producer SK On (Seoul, South Korea), and Panasonic Corporation’s (Osaka, Japan) $4 billion brownfield plant in De Soto, Kansas.
Subscribers can read more information on the Hyundai-SK and Panasonic projects.
Data centers also factor heavily into projects under construction, especially those from tech giants Microsoft Corporation (NASDAQ:MSFT) (Redmond, Washington), Facebook and Instagram parent Meta Platforms Incorporated (NASDAQ:META) (Menlo Park, California), Amazon.com Incorporated (NASDAQ:AMZN) (Seattle, Washington), and Google parent Alphabet Incorporated (NASDAQ:GOOGL) (Mountain View, California).
- Microsoft expects construction of a $1.1 billion grassroot Phase 1 data center in Mount Pleasant, Washington will wrap up in late 2026 (see project report). Also underway is a Phase II expansion of its data center campus in Cheyenne, Wyoming, which is expected to be completed next year (see project report)
- Also in Cheyenne, Meta is constructing the first two buildings at a grassroot data center campus. Named Project Cosmo, both buildings will feature four data halls (see project reports)
- Google parent Alphabet Incorporated (NASDAQ:GOOGL) (Mountain View, California) is building out the $800 million first phase of a planned three-phase project in Mesa, Arizona, with the first data center building expected to begin operations in 2025. Subscribers can learn more by viewing the project report
- Amazon.com Incorporated (NASDAQ:AMZN) (Seattle, Washington) is in the process of expanding its data center campus in Boardman, Oregon, with the $600 million project expected to wrap up early next year (see project report)
