CEO's Say they will increase capital spending

In terms of the overall U.S. economy, member CEOs estimate real GDP will grow by 2.9% in 2011, an increase from the 2.5% expected in the fourth quarter.
According to the survey, 92% of CEOs expect their companies’ sales to increase in the next six months, a 12% increase from the fourth quarter of 2010. Meanwhile, 62% expect their companies’ capital spending to increase, compared to 59% in the fourth quarter, while 52% expect their companies to hire more workers, up from 45% last quarter.
The survey was completed between Feb. 28 and March 18 and responses were received from 142 member CEOs.

http://blogs.wsj.com/economics/2011/03/30/ceos-expect-to-boost-sales-hiring-spending/?mod=WSJBlog&mod=marketbeat#

Corporations Spending on Capital Equipment

As Equipment Purchasing Surges, Unemployment Remains High

Many companies are ramping up equipment purchases to boost productivity, reinforcing a gap between capital spending and employment in the United States.
Corporate investment will rise 11 percent this year as sales pick up, following a 15 percent gain in 2010, according to “Man vs. Machine,” a Feb. 2 report from Bank of America Merrill Lynch. Employment will grow just 1.7 percent, after a 0.7 percent increase last year.
Inventory rebuilding, low borrowing costs and government policies that include a new tax break on equipment purchases are powerful spurs for capital spending, said Neil Dutta, the Bank of America economist behind the report. The job market lacks such drivers and will form a “mediocre” underpinning for household spending, the biggest part of gross domestic product, he said.
The Institute for Supply Management’s manufacturing index has risen for seven consecutive months, surging in February to the highest level since May 2004. Although the labor market is “improving gradually,” unemployment remains “elevated,” according to the Federal Reserve. The jobless rate could hold at 8.9 percent in March for a second month, the lowest since April 2009, based on the median forecast in a Bloomberg News survey ahead of Labor Department figures due April 1.

Equipment Leasing Industry Find Companies Are Purchasing Equipment Again

(Reuters) - A key measure of U.S. business activity rose sharply in February from a year ago, as companies borrowed more to invest in their operations, but the reading was down slightly from the prior month and credit quality eased, a lender group told Reuters on Tuesday.

The Equipment Leasing and Finance Association (ELFA) said U.S. businesses originated $4.1 billion in loans, leases and lines of credit in February to invest in everything from computer hardware to office furniture and machinery.

That was slightly below January's $4.2 billion total and well below December's $9 billion figure, but up 28 percent from a year ago, when the U.S. economy was beginning its gradual recovery.

February marked the 10th consecutive month of year-over-year gains, and the third straight month such gains were above 20 percent.

"It's a nice, steady trendline up," said ELFA President and CEO William Sutton. "Everything we are seeing throughout the economy (points to) steady, albeit slow, growth."

Fed Up Corporations Turn to Private Jets

Between exhausting lines at security and countless flight delays and cancellations, the concept of a “quick flight” no longer exists. In reaction, many corporations are taking matters into their own hands by investing in corporate jets to fly executives and employees on business trips. For many companies, it is the time savings that turns them onto private jetting.  Daniel Jennings, CEO of the Private Jet Company, said that since October 2010, his inquiries from companies looking to purchase private jets have doubled.

“Once you are a company that starts having operations regionally and nationally, it gets difficult to do visits in a timely manner without going privately,” Jennings says. “You can do four-to-five locations in a day, instead of over four or five days. And, they can do work on the aircraft.”

Paul Cardarelli, director of sales and marketing for JetNet LLC, says that while there has been an uptick in sales for 2010, the market still remains somewhat bloated with jets for sale. In 2010, JetNet found that a total of 1,989 jets were sold, 1,454 of which were previously owned; compare that to 2009, when 1,885 jets were sold, with 1,210 being pre owned. Since the start of 2011, JetNet reports 284 jets have been sold, 234 of which were pre-owned, Cardarelli said.

“Airplanes have never been cheaper, and people want to cash in,” he says. “Business aviation in itself has never been more attractive, because the whole airline experience has frankly never been worse.”

He continued to say many companies are investing in their own jets to avoid the hassle of having their executives battle crowded airports. “Why unnecessarily submit yourself to waiting in line for two hours at the TSA? If you have the wherewithal for business aviation, it’s a very attractive option.”

This year looks strong for business aviation, according to Jennings, who cites more companies starting to turn a profit and some even looking to expand. Supply of private jets is starting to go down while demand is on the rise.

“They see the economy turning in their own business, and they don’t want to miss an opportunity to acquire [jets] at low discount prices,” he says.

Cardarelli estimates the typical business aircraft operator is flying about 300 hours a year, and when the economy was stronger,  that number was closer to 400 hours annually. This year will continue to be a year of recovery, he said, because GDP is up and that directly impacts business aviation.

All in all, it is time and convenience that leads these companies to opt for private jets, Jennings says. This trend will continue to pick up over the course of the next year.

“It literally conducts business anywhere, anytime, with no security or headaches,” he said. “It literally buys them time. We call it a time machine.”

Global Wind Energy Increasing

Wind turbine installations may rise 20 percent this year worldwide and double by 2015, the Global Wind Energy Council said in a statement today.

Capacity to produce electricity from the wind may rise by 40 gigawatts in 2011 from 294.4 gigawatts at the end of last year, the lobby group said in a statement from Brussels. By 2015, it forecasts 450 gigawatts.
“2010 was a tough year for our industry, but 2011 is looking up,” said Steve Sawyer, secretary general for GWEC. “We’ve paid the price for the 2008 and 2009 financial crisis. Now we’re back on track.”  

Source: Bloomberg

Economists Weigh in on the Disaster in Japan

According to several top economists the disaster that happened in Japan 3 days ago will have a tremendous effect worldwide.  In the aftermath of a series of earthquakes and a tsunami that has also destabilized a number of the country’s nuclear-power facilities, Japan’s economy is likely to see positive and negative effects from the disaster, economists write. While the report, issued by economists Takahide Kiuchi and Kohei Okazaki, uses the Kobe earthquake of 1995 as a reference point, it is also careful to note that the still-evolving nature of last week’s disaster makes estimating its impact on financial markets “problematic.”

Negative economic effects described by the report are expected to last as long as six months and are attributed to the loss of material resources such as housing, industrial facilities and offices, and public infrastructure. A reduction in consumer activity also is expected to adversely affect gross domestic product. Expanded public, capital and housing investment expected to accompany medium- and long-term efforts to rebuild will deliver a positive effect on the economy, according to the report.

The disaster is also expected to delay Japan’s exit from its economic lull. “We expect the negative impact on real GDP growth to be greatest in Apr–Jun, but we believe it is too pessimistic to expect a sharp downturn in the Japanese economy,” according to the Nomura report. “On the other hand, we do not expect rapid expansion in rebuilding demand stimulated by significant government spending to drive a V-shaped recovery, given the precedent of the Kobe earthquake and the delays to funding then.

American's Do Not Trust U.S. Government and Banks

According to a new Wall Street Journal Poll, Americans have lost faith in federal banking institutions. The recession has hit hard and people have zero confidence in government and banks. Banks, government and other institutions in the U.S. suffered a greater loss of trust than those in most other countries during the financial crisis and recession, new research suggests. That could potentially weigh on the economy for years to come.  

http://online.wsj.com/article/SB10001424052748703662804576188732849964682.html?mod=WSJ_economy_LeftTopHighlights

Are US Executives prepared for the proposed accounting changes

US Executives seem unprepared to deal with changes to lease accounting rules proposed by the IASB.  According to Deloitte research only 7% of respondents questions believed their company was prepared for the possible changes.  The firm questioned over 280 Executives throughout the US.  The suggested changes require more details to be included in financial reports, such as how to account for leases related to property and equipment. 

It is clearly evident that many US companies are concerned.  The compliance issues that would accompany the proposed changes would greatly impact financing, lease lengths and property strategy.  More than 40% of respondents believe the new standards would make it difficult to obtain financing in the future.