US companies spent almost $600bn in buying-back
their own shares in 2013 and this was almost a third of capex: capital
expenditure represented by the nominal purchases on plant, equipment and
intellectual property spent by the economy’s entire business sector.
The Wall Street Journal says that while that’s a
positive trend for household wealth, it raises questions about companies’
commitment to move ahead with capital spending projects.
The Journal also says
that companies purchasing their own shares represent the single biggest category
of stock buyers today, according to a study this month by Jeffrey
Kleintop, chief market strategist at brokerage firm LPL Financial.
Only one other major group, individuals, is a net stock buyer now and
individuals are buying less than corporations, Kleintop found. Of six
major groups he identified, hedge funds, foreigners, insiders and investment
institutions such as pension funds and insurance companies all are net sellers,
he found. He used data from the Fed, the US Treasury, FactSet, the Investment
Company Institute and other sources.
Companies spent $598.1bn on stock buybacks last
year, according to Birinyi Associates - - the second-highest annual total in
history, behind only 2007, Birinyi calculated. The pace picked up in the first
quarter of 2014, when companies spent $188bn, the highest quarterly amount since
Members of National Association for Business
Economics expect business investment on equipment and IP to grow by 3.1% in 2014
compared with 2.7% in 2013.
A survey of big firm chief executives released by
the Business Roundtable shows a decline in capex spending plans. Only 44%
think their company’s spending will pick up in the next six months, down from
48% saying that in the first quarter while only 24% of small-business owners
plan capital outlays in the next 3 to 6 months, according to the National
Federation of Independent Business. The reading has made no headway in over a
year because small firms are in “maintenance mode,” the NFIB report said.
Trend of falling business investment in developed countries