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CEOs are Spending: 48 Percent Will Increase Cap Ex in 2012

In the early months of 2011, CEOs seemed optimistic about investing in their companies, with 52 percent expecting to increase capital expenditures over the year. This optimism plummeted in June to 41.4 percent and stayed relatively low throughout the remainder of 2011. The new year brings the highest cap ex expectations in 7 months with 47.6 percent of CEOs expecting to increase investments in 2012.

CEO willingness to invest in their companies is a signal to the future, and according to January’s CEO Confidence Index, CEOs are starting to invest again. Almost 48 percent of CEOs (47.6 percent) expect to increase their capital expenditures over the next 12 months.  Only 16.8 percent expect to decrease their capital expenditures.

CEOs reached a 2011 low for increased cap ex expectations in July, with only 39.9 percent expecting to increase spending. In October, the number of CEOs expecting to decrease their capital expenditures reached a high of 24.8 percent.

It seems, however, that expectations are starting to bounce back.

As one CEO said, “Despite slower recovery in the construction and housing markets, we are now expecting to hire more personnel across multiple disciplines within our company to attend to customers for added services. Our revenue resources are now more diversified than in the previous years and therefore demand greater management. This year we will continue to invest in new equipment and replace most of depreciated assets, allowing us to perform at a higher level.”

Another CEO said, “We spent a lot on a move last year, so we will spend less this year, but we expect growth.”

And another, “We are a low cost provider, so we will have some capacity to increase spending and investment.”

Many CEOs are still hesitant to invest until the upcoming election, and so it will be interesting to see what moves CEOs make in 2012.

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